Can a company be used to earn income even if in private name?

Can a company be used to earn income even if in...

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I'm curious about something.

Someone I know is starting a business venture involving online banner advertising. He has an account with a site in which money is paid into and a special credit card which has his own name on it, but is related to the site. Basically the site use it as a means of withdrawing the money.

Now it's based in the US, but he is UK resident so I know all about the fact that he pays tax on worldwide income. 

However currently he's self employed and thus filing a tax return and paying tax on his profits which are becoming extreme as time goes on and as such he would be incurring NIC at a high rate.

Now he's considering forming a company and using that as a shell, but I have a question on that.................

Technically doesn't a company have to earn the income "itself" to class as business income otherwise it doesn't count? The account on the site is in his own name and so is the credit card used to withdraw the money, but he didn't have a choice on that, it would only let him use his own personal name because they required an ID check for money laundering purposes. 

Normally in a business you invoice for sales in the company name, have a business bank account etc, although I have seen people use a company with personal accounts before in which everything book-keeping wise is shown through a director loan account.

Could this technically work then? If he is willing to put up with the extra admin/charges of using a company can he declare that everything he's earning from this online banner business is "company income" despite the accounts/credit card being in his name and thus pay tax at the companies rate rather than income tax rates? Is there a rule or legal issue that stops that? This is technically a business after all (i.e. he's not employed in any sense of the word so ignore IR35) so can he use a company instead of being self employed?

Thanks.

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By petersaxton
23rd Sep 2012 17:11

You know a lot about this person!

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