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Personal credit card charges charged to company

Credit card used exclusively for company but actually in personal name of director - chg deductible?

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I have a client who has a bunch of credit cards that he has been using for his limited company. This is my first year with him and it looks as though he funded the company via a personal credit card and is now balance transfering every 6 months or so, occasionally incurring bank charges.

From what I can see the card debt was accounted for in the PY as a company debt not a directors loan. My initial instinct is that the debt is not the company's and therefore should, if anything, be accounted for as a directors loan. Any charges and interest incurred would be a matter for the self assessment, not for the company and CT600.

Are there any circumstances where one might include it as a company debt? It is in reality a company debt but a liquidator would not see it that way. The costs incurred are purely as a result of the company owing money to the credit card company, albeit via the director.

Is saw this and thought it may have some relevance (https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim01010 ).

Before I go back to the client and disappoint him with the news that its a directors loan and he will have to manage to it through the self assessment (which he is insisting on doing), is there a way we can manage it through the company?

I would be interesting in hearing what others would do in this situation, and any pointers to HMRC legistlation etc

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22nd Jul 2019 13:30

I agree that the credit card company is not a creditor of the company.

I do not necessarily agree that the charges and interest should not be in the company's profit and loss account. If the account is used wholly for business purposes, and the shareholder's account with the company would not be overdrawn at any time before you credit him with the unpaid credit card liability, I would probably expense the charges and interest in the company.

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to johngroganjga
22nd Jul 2019 14:29

I guess that the amounts involved are unlikely to cause sleepless nights, but I would expect HMRC, if they were minded to have a look, to raise the wholly, exclusively and necessarily incurred while carrying out duties point.

(Which doesn't of course, prevent the company from deducting the charges for CT purposes.)

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22nd Jul 2019 13:41

Where the card is being used solely for company purposes and the individual derives no benefit, a declaration of Trust could be made to show that the card is being held on the company's behalf. This comes with risk but if the company can't get its own credit and it's well administered, the risk could be regarded as lower than say a mixed use card. If the company relies on it, then there's an argument for using it although it would be best to avoid anything that muddies the water.

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to Jerome_Lane
22nd Jul 2019 13:46

Balderdash! You can't settle a debt on somebody. If you can, I'm going to give you all my credit card balances, just to spite you!

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to Jerome_Lane
22nd Jul 2019 13:56

I did wonder whether there was some sort of trust potentially involved here. I'm not an expert in this. Anyone else consider that this might be the case?
Declaration of trust - presumably that's a reserved activity that requires a solicitor?

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to Kylo Ren
22nd Jul 2019 14:08

Yes drafting declarations of trust is a reserved activity, but you are barking up the wrong tree entirely. The only asset here is the credit card company’s right to recover the unpaid credit card liability from the company's shareholder. Who are they going to be saying they hold that in trust for in the declaration of trust of which you speak?

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to Jerome_Lane
22nd Jul 2019 14:03

Welcome to AccountingWEB.

Vile likes you. The clue is in "Balderdash!" :-)

(You'll see what I mean soon enough.)

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to Jerome_Lane
22nd Jul 2019 14:48

Jerome_Lane wrote:

Where the card is being used solely for company purposes and the individual derives no benefit, a declaration of Trust could be made to show that the card is being held on the company's behalf.

The credit card agreement would presumably have something to say on the matter,

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to Jerome_Lane
22nd Jul 2019 14:48

Jerome_Lane wrote:

Where the card is being used solely for company purposes and the individual derives no benefit, a declaration of Trust could be made to show that the card is being held on the company's behalf.

The credit card agreement would presumably have something to say on the matter.

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to Accountant A
22nd Jul 2019 14:56

Justin says it's OK to ignore those.

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to Tax Dragon
22nd Jul 2019 15:03

Justin's view is based on case law.

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to Tax Dragon
22nd Jul 2019 15:12

I might be missing something here - who is Justin? And what are we ignoring?

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to Kylo Ren
22nd Jul 2019 15:57

Justin's a man with a house, and we are ignoring the legal agreements that govern the credit cards. This is more a side discussion about Justin to be fair, rather than being relevant to your OP.

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By frankfx
23rd Jul 2019 10:36

https://www.gov.uk/government/publications/interest-and-alternative-fina...

the closing sentences are required reading

''You cannot claim relief for interest on overdrafts or credit cards''

''If you’re not sure whether you can claim relief for any interest paid or alternative finance payments, ask HMRC or your tax adviser'' …..

(opinions may differ !! )

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24th Jul 2019 11:01

If the previous accountants have a practicing certificate I would be tempted to report them to their supervising regulatory body.
Also:Why was there a change of accountants?

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to geoffmw1
24th Jul 2019 11:41

Really? If the regulatory bodies received a report every time that a new agent spotted a mistake by the previous ...

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By paddy55
24th Jul 2019 13:05

The poster is borrowing money via his credit card and lending money to the company. He is paying interest on the money borrowed. At present, he seems to be lending the money interest-free to the company. If he wants the company to pay interest on the money lent, he must enter into a loan contract with the company whereby they agree to pay interest on the money borrowed.

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24th Jul 2019 13:28

What an abundannce of absolute c0ckwaffle.

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31st Jul 2019 16:36

My suggestion about reporting to a regulatory body was not about a mistake but apparently conniving with their client in a misdemeanour which at the very least is unethical.

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31st Jul 2019 16:36

My suggestion about reporting to a regulatory body was not about a mistake but apparently conniving with their client in a misdemeanour which at the very least is unethical.

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