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Ltd Company using a personal bank account

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I have a non resident director, who is the sole shareholder and director of a company. They were unable to open a UK LTD Company bank account without coming to the UK, for their first year they opened a personal account and used this 100% for business purposes. They made no withdrawls from the account at all. The only expenses in the account are business ones.

In the office we have 2 sides, one which says all the money in the account should be treated as DLA and charged 32.5% with not bank charges or interest credited to the company. The other which is that the account is in effect a company account as only company expenses etc have gone through it. We would be interested to have some other thoughts on this. Obviously this has a significant impac on the tax bill.

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By Ruddles
30th Nov 2017 10:24

What you should do is seek HMRC's agreement that they are prepared to accept that the funds are held on trust for the company. They have been known to accept (and reject) such treatment. If they reject, you still have the option of ignoring their rejection and seeing where that takes you - depending on the precise facts you might find that a Tribunal is sympathetic to your client's position.

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By johngroganjga
30th Nov 2017 10:45

Your clients are more likely to succeed with the approach Ruddles suggests if they document the fact that the funds in the account are held on trust for the company - i.e. by making it an express trust. It is always much easier to argue that an express trust is a trust than to argue the existence of an implied trust. Indeed, if I were HMRC, and feeling mischievous, I would argue that the very absence of a trust deed was evidence that there was no intention to hold the money on trust - if they wanted there to be a trust why would they not take the most obvious and simple step to give effect to their alleged intentions? etc.

Indeed, once you have a trust deed I would not bother seeking HMRC's agreement that the money is held on trust.

It's not just about what HMRC think of course. It starts with what you as the company's accountant think about whether the money belongs to the company or not, and whether you can account for it as such. If you are not prepared to treat it as trust money you can hardly expect HMRC to disagree with you.

Once the appropriate trust deed is executed I see no reason why you should not be content to account for the money as belonging to the company.

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By BIGWAL
30th Nov 2017 20:27

There is no legal requirement for a limited company to have a bank account. Obviously there are difficulties in using a personal account, and not to be recommended but there's no obligation to have one.

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By thestudyman
02nd Dec 2017 14:37

BIGWAL wrote:

There is no legal requirement for a limited company to have a bank account. Obviously there are difficulties in using a personal account, and not to be recommended but there's no obligation to have one.

The director would be breaking the Banks's terms and conditions for running a business through a personal bank account.

I would say it's very highly recommended they should attempt to get a business bank account.

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