Buying coffee/lunch through limited company

Buying coffee/lunch through limited company

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Can you purchase coffee/lunches through your limited company knowing these are not tax deductible expenses? Will they be added back in your tax comp but still saving you the personal tax of not personally withdrawing this money first?

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By David Ex
15th May 2024 10:46

awise1000 wrote:

Can you purchase coffee/lunches through your limited company knowing these are not tax deductible expenses? Will they be added back in your tax comp but still saving you the personal tax of not personally withdrawing this money first?

If you’re interested, do the calculations and you’ll find out. Remember to state your assumptions.

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Replying to David Ex:
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By awise1000
15th May 2024 11:24

For illustrative purposes if I buy a coffee (£3) and lunch (£7) every day - £50 per week for 48 weeks a year that’s £2,400.

If the limited company bought this I would pay no personal tax on it, just the CT when it’s added back on the tax comp.

If I withdrew the money to pay for this and my effective tax rate was 10% (round figure using dividends) I would pay £240 on £2,400 withdrawn in addition to the CT.

Not huge sums of money but I just haven’t come across an answer for this so was curious. Appreciate the reply

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Replying to awise1000:
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By Tax Dragon
15th May 2024 11:29

awise1000 wrote:

If the limited company bought this I would pay no personal tax on it, just the CT when it’s added back on the tax comp.

If that's what you think then you do need to pay more attention to Justin's reply.

He's a clever fella, that Justin.

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Replying to Tax Dragon:
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By awise1000
15th May 2024 11:56

Thanks fellas, smarter man than I

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By Justin Bryant
15th May 2024 10:46

I think there's a c£300 p.a. exemption.
https://www.gov.uk/expenses-and-benefits-trivial-benefits

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Replying to Justin Bryant:
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By Tax Dragon
15th May 2024 10:53

It's a CT question Justin.

For once an OP has even tagged their question appropriately.

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Replying to Justin Bryant:
By SteveHa
15th May 2024 13:34

Except (s)he didn't ask about BIKs. (s)he asked about saving personal income tax by not paying the cash out as salary/dividend to pay for the tea/coffee etc. personally.

Now I'm not having a go at you if you want to answer a question that perhaps should have been asked, but wasn't, but don't criticise those that highlight that's what you have done.

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By Duggimon
15th May 2024 11:08

You could buy me lunch through your limited company even knowing it's not a tax deductible expense and will be added back on your tax comp but will save you personal tax on withdrawing the money and buying it yourself, but I'm not sure you were offering to buy me lunch.

Perhaps add a bit more info and direct the question to your accountant. Or just direct it to your accountant as is and let them pick the morsels of additional information from 'twixt thy teeth.

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By Matrix
15th May 2024 12:13

If it wasn’t lunch but paying for a holiday or car or clothes then would you treat as above?

Your lunches may be allowable for CT but with PAYE obligations - it is personal expenditure so no different to any other profit extraction.

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Replying to Matrix:
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By rmillaree
15th May 2024 13:25

if its a trivial benefit is it not a free lunch though ?

ok slightly tongue in cheek post here i must admit

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Replying to rmillaree:
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By Matrix
15th May 2024 14:01

Maybe for 6 weeks out of 48 but not really how the rules work if it is a regular commitment, don’t have the exact wording in front of me.

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Replying to rmillaree:
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By Paul Crowley
15th May 2024 15:19

Cannot believe it took this many comments before trivial benefits came up

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Replying to Paul Crowley:
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By Tax Dragon
15th May 2024 15:26

It didn't. They were the subject of the comment posted second.

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By Paul Crowley
15th May 2024 15:34

Everything you postulate is wrong. If it were true then why leave it at coffee and lunch
NOT a corporation tax issue. It is a benefits problem.
You can have up to £300 maximum in the tax year to 5th April in trivial benefits. Everything else becomes a taxable benefit, and on which there will be tax to pay by yourself and ERs National insurance payable by the company.
There are lots of rules on this, the trivial benefits must comply with the rules, if not complying then they become taxable benefits.
Generally taxable benefits are not the most tax efficient way to get money out of a company.
ERNIC is 13.8% and Dividend tax is 8.75%. To which admin needs to be added and payrolling of benefits will increase both the admin and risk of error.

Every clever thing that you can think of has been thought of before and blocked by legislation.

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Replying to Paul Crowley:
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By Matrix
15th May 2024 18:07

At least it wouldn’t have it be added back in the tax comp ;)

It’s £2,400 a year though.

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By FactChecker
15th May 2024 23:22

OP: whilst there's lots (well some) useful info on here already, I'm going to suggest you go back a step and think about your opening sentence:
"Can you purchase coffee/lunches through your limited company .."

* that first 'you' is an individual;
* whereas 'your limited company' is just a limited company.
Basically those are two quite separate entities - an individual taxpayer and an incorporated company. The fact that the former may own 100% of the shares in the latter doesn't make them synonymous for tax purposes.

So the phrase "Can you purchase coffee/lunches through your limited company" isn't actually possible (in the sense that you appear to mean). In reality:
- if the company pays for them then it is the company (not you) that purchased the coffees/lunches;
- since I know of no means by which an inanimate entity (the company) can consume those edibles, they will be left to decompose UNLESS they are either sold by the company or given away by it;
- and, since you've not mentioned 'your' company being in the food trade, it seems likely that it is you (the individual) who will be consuming what is not your property.

The remaining choices are all likely to be unpalatable to you ... you could have stolen the company's property, or bought the company's coffees/food (which makes a bit of a mockery of this convoluted process), or were given them by the company - which makes them a BiK.

The niceties of various tax regimes (and whether or not Trivial Benefits can be brought into play) are to me unimportant until you understand the separation of 'you' and 'your' in your original question.

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Replying to FactChecker:
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By awise1000
15th May 2024 23:40

What a sour reply to a curious question. We all know that the company is its own legal entity but you go to an accountant for maximum tax efficiency. Guessing you’re not too hot on the client relations side of accounting… partner isn’t for everyone.

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Replying to awise1000:
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By FactChecker
16th May 2024 00:12

Well at least we're agreed that it was "a curious question".

If you already knew "that the company is its own legal entity" (and by inference therefore everything else in my above post), then your question was pointless.

Anyway, good luck with your hunt for "an accountant for maximum tax efficiency" - as you presumably don't have one or you wouldn't be asking such questions here. You may find that the better ones aren't *solely* fixated on tax efficiency (and that the breadth of their advice will be to your greater benefit).

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Replying to awise1000:
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By More unearned luck
16th May 2024 15:45

"Guessing you’re not too hot on the client relations side of accounting… partner isn’t for everyone."

What a brilliant way of encouraging people to give expert advice for free.

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Replying to More unearned luck:
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By FactChecker
16th May 2024 16:54

Doubt OP will notice ... but you may see a disparity between the 'number of posts' at top of page and the number that you can read here.
The difference being accounted for by an OP response that was both gratuitously offensive and personal (but not aimed at me for once) ... reported and now removed.

Why is that those with problems try to pin them onto benign helpers?

EDIT: 'number of posts' has now been updated, but the background remains.

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Replying to FactChecker:
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By Tax Dragon
18th May 2024 21:18

I somehow managed to miss the deleted comment.

But some of the regulars' banter has also gone, for no obvious reason. I guess someone didn't get the joke.

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Replying to Tax Dragon:
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By FactChecker
18th May 2024 21:40

There was an oblique reference to the effect that OP's nom de plume might have breached the Advertising Standards Authority guidelines ... and then the bile arrived.

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Replying to FactChecker:
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By Paul Crowley
18th May 2024 22:07

Yes I remember it, dare not repeat it as I am already on the list of 'one more report about you and.....'

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Replying to Paul Crowley:
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By Tax Dragon
19th May 2024 09:42

But any bilious response from the OP was nothing to do with the earlier jocular responses (particularly from Justin) that have also been removed.

I don't normally comment on modular* decisions, as it's not my place, but if it is the case that Justin (a regular contributor) has been suspended for making jokes [whether you found them funny or not] and the OP (a one-thread extractor*) has not been suspended despite a[n allegedly - I missed it] bilious response... let's just say I fail to see any (including commercial) logic there at all.

* Contextual definitions available on request

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Replying to Tax Dragon:
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By Paul Crowley
19th May 2024 20:06

My recent ban was for comments on the vegan thing. That person was a newbie that has only commented on the one thread, and remarkably changed her user name as soon as the ban took place. What a coincidence that a newbie joins to just comment on one single article. Still miracles do happen.
My confidence in the mods really is at an all time low. They send a PM and ban. No way of reading the PM, because banned.

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Replying to More unearned luck:
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By Paul Crowley
18th May 2024 22:00

+1
A basic newbie error. Annoy the regulars. You know the people that bother to waste their time trying to inform questioners why their clever idea has already been thought of and blocked by HMRC.

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By Paul Crowley
18th May 2024 22:02

This becomes a dead thread once newbie decides to, well we all know.
But I would love to read the bile that OP posted into the public domain.

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