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Sole trader paying for LTD's mortgage, expense?

How would I account for money coming directly out of a sole trader account paying for an ltd's mortg

Didn't find your answer?

I'm currently stuck on what I should log something under as.
There is a sole trader which is paying for an ltd's mortgage. The money is directly coming out of the sole trader's account as a direct debit.

What would this be logged under as, how should I account for this on the sole trader's side. Not the ltd's side.

Thank you!

Replies (9)

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Scalloway Castle
By scalloway
10th Apr 2020 12:19

Why is the sole trader paying the mortgage? 2 possible reasons

1. It is the sole trader taking drawings to cover the ltd company's outgoings.
2. The sole trader's business gets some benefit from the arrangement, eg the use of the building. So it is a payment in lieu of rent.

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Replying to scalloway:
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By Alexanderaccounting
10th Apr 2020 16:09

Sorry, I wasn't clear enough.
The sole trader is taking drawings because the sole trader and ltd both belong to the same person.
The person is extracting money from the sole trader to pay for the mortgage on the ltd.
However I'm not sure if this would account as a propieter's drawing as the money is not actually used by the owner for personal use but rather to be used to pay off the mortgage on another building

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Replying to Alexanderaccounting:
By johngroganjga
10th Apr 2020 16:33

You are still not explaining what the terms between the individual and the company are. Is he expecting the company to reimburse him?

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Replying to Alexanderaccounting:
Scalloway Castle
By scalloway
10th Apr 2020 16:36

The sole trader is one legal entity.

The limited company is another different legal entity.

So one legal entity is drawing funds to pay into another legal entities bank account.

Ownership of the limited company has nothing to do with the sole trader business

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By paul.benny
10th Apr 2020 13:44

How's this different from the question you asked two days ago?

https://www.accountingweb.co.uk/any-answers/sole-trader-paying-for-limit...

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Replying to paul.benny:
By johngroganjga
10th Apr 2020 14:12

The first question was about the bookkeeping entries for the company whose mortgage was being repaid.

This one is expressly not about that, but about the entries for the individual making the payments.

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Replying to johngroganjga:
ALISK
By atleastisoundknowledgable...
10th Apr 2020 18:23

I’d say this this thread is asking the question that he meant to ask in the first thread, but worded really badly. Plus he didn’t want the facetious responses in this thread.

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RLI
By lionofludesch
11th Apr 2020 07:34

Alex - John asked a very simple question.

Is the trader expecting his money back one day?

This could be rent, a loan or drawings. Maybe something else. On the basis of the information you post, we can only guess.

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By Tim Vane
11th Apr 2020 09:46

The sole trader in question is presumably unaware of the distinction between himself (as a sole trader) and the company (being a separate entity). His accountant will be able to explain this to him and point out the implications. You’d think.

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