Sole trader claiming expenses from company

Sole trader claiming expenses from company

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I've a new client who has a limited company and is also self employed.

He did some work through the limited company for a third party. He has then invoiced his own company from his sole trader business (I think he's done this instead of a salary to use up his personal allowance) for the work he did on behalf of his company.

He also wants to put in an expense claim to his company for expenses he incurred whilst working for the company(travel, subsistence etc). Am I correct in thinking that as he wasn't an employee, he can't just claim expenses. He's operating as a separate entity (sole trader)  and so, would have to invoice his company for any expenses incurred.

Replies (8)

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By Tim Vane
03rd Nov 2015 18:03

What's the problem? Assuming that he is the sole director and shareholder of the company, he can do what he likes and pay whatever he wants to any other party, including himself.

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By Rayman
03rd Nov 2015 19:33

If IR35 does not apply, and the director is not currently employed by his business (PAYE), then I don't see why not.

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By cheekychappy
03rd Nov 2015 20:48

Is this a ploy to avoid reaching the threshold for VAT in the limited company?

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By daviddaniels
04th Nov 2015 09:07

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He wants to put an expenses claim in to the company (as though he was an employee), just to reimburse expenses he's incurred. Surely, as he isn't an employee he would have to invoice the company from the sole trader business. 

 

The sole trader is VAT registered, the company isn't.

 

 

 

 

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By Kezza
04th Nov 2015 09:15

If he is a director of the company then he is an officer, rather than an employee. This means that he would be entitled to claim for expenses incurred in fulfilling that position, so no problem with that side.

The key thing to check is that he is not claiming the expenses twice (as expenses to the ltd and also through the Sole Trade) and is not claiming the VAT back on the Sole Trading entity.

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By Tim Vane
04th Nov 2015 09:28

Ah, I see your issue now. If he disburses external expenses direct to the company neither he nor the company can reclaim the VAT. If he invoices the company then he must add VAT to the invoice which the company must pay but cannot reclaim. If the expenses are put through the company as a director then again there can be no VAT reclaim. So as mentioned you will need to keep tabs to make sure that the correct VAT entries are made and that the sole trader is not attempting to reclaim VAT on the company's expenditure.

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By JCresswellTax
04th Nov 2015 10:05

So he is

Invoicing his own company + VAT when his company can't reclaim it?

So is losing 20% as VAT straight away?

Are you sure this all works out correctly?

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Replying to Jonno1:
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By daviddaniels
04th Nov 2015 10:46

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JCresswellTax wrote:

Invoicing his own company + VAT when his company can't reclaim it?

So is losing 20% as VAT straight away?

Are you sure this all works out correctly?

Yes, he's invoicing his own company + VAT and the company can't claim it!

 

He's one of those clients that thought he can do it all himself and then realises he can't. He first contacted me last week and the company's Y/E is Nov 14!  He paid a subcontractor, but hadn't registered for CIS and I suspect (not seen the actual figures) that the company went over the VAT threshold some time last summer. 

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