Using a Limited company for travelling allowances.

Could a limited co be used to do the buying & account for travelling expenses for a sole trader

Didn't find your answer?

Hi, I am a sole trader and have to travel to buy stock,  I have been dealing with this using the
mileage allowance. I am starting to travel further afield and would like to know if it is thought
to be feasible to use a limited company to buy stock, then sell it to me (for a small profit just
greater than the expenses/mileage) and then claim it back from the limited company as a payment.
Til now have done everything DIY as I have a relative who has some experience and has helped
me out.. but this has stumped them.. Any imput appreciated..  many thanks..

Replies (28)

Comments for this post are now closed.

avatar
By WhichTyler
09th Apr 2018 14:08

It will depend on your circumstances bu I would have thought that the additional cost of running a company and PAYE would be greater than the tax saving. Once you have a company why not put the trade through that?

Thanks (0)
Replying to WhichTyler:
avatar
By Finley
09th Apr 2018 15:36

Thanks, at the moment, I put down the mileage and offset it against the profit. 45 p etc up 10000.. but if it went through a limited company the 45 p ect could still be claimed against the profit for the company but be PAID out.. is that right ?? thanks..

Thanks (0)
Replying to Finley:
avatar
By WhichTyler
09th Apr 2018 15:49

Not sure I follow your logic, but if the company pays you the 45p then it becomes your income (that you don't have at the moment)

Thanks (0)
Replying to WhichTyler:
avatar
By Finley
09th Apr 2018 16:05

Hi, thanks. yes, and under the mileage allowance scheme it would be tax free.. ??

Thanks (0)
avatar
By andy.partridge
09th Apr 2018 14:20

Terrible idea to solve a problem that doesn't exist.

Thanks (1)
Replying to andy.partridge:
avatar
By Finley
09th Apr 2018 15:44

Hi, thanks, at the moment, I put down the mileage and offset it against the profit. 45 p etc up 10000.. but if it went through a limited company the 45 p ect could still be claimed against the profit for the company but be PAID out.. is that right ?? it is not a large business 'lifestyle' but 10000 miles @ 45 p adds up to a good sum.. any imput appreciated.. thanks..

Thanks (0)
Replying to Finley:
By Ruddles
09th Apr 2018 16:02

OK, I'll bite - how are you going to pay the company for the stock?

Thanks (0)
By Ruddles
09th Apr 2018 14:24

If your existing 'accountant' is unable to help, time to find a new one. There are a number of issues to consider here, and you shouldn't expect the advice to be given away freely (although you may find some generous soul that is prepared to do just that).

EDIT - See what I mean? Andy's advice is spot on, and free.

Thanks (0)
Replying to Ruddles:
avatar
By Finley
09th Apr 2018 15:31

Thanks existing 'acountant' is a relative who helps me out.. so got to try !!

Thanks (0)
Replying to Finley:
By ireallyshouldknowthisbut
09th Apr 2018 18:26

hey Finle, your relative may be well meaning but by the sounds of it don't have a clue.

You will probably both be much happier if you just hire a proper accountant who does this stuff for a day job.

Thanks (0)
Replying to ireallyshouldknowthisbut:
avatar
By Finley
09th Apr 2018 19:02

Hi, thanks, we have muddled along for thirty years, no problems.... just got this one stuck in my mind.. think I understand now it is probably no hoper !!

Thanks (0)
Replying to Ruddles:
avatar
By andy.partridge
09th Apr 2018 15:40

Free? No, I'm harvesting the data to illegally influence Sift's moderation policy when they offer a referendum to members.

Thanks (1)
By Tim Vane
09th Apr 2018 15:27

The problem with the limited company approach is that it only goes half way to solving your non-problem. The best option is to setup a company with yourself as sole director and share holder, then setup a separate partnership with two partners being yourself and the company. Then you personally buy a van and put it into a settlor-interested trust, with yourself as the sole settlor, beneficiary and trustee, and the trust can lease the van to the limited company, which will employee you to drive it 2 days a week. The other 3 days a week the van is leased to you personally as a sole trader, and you then sub-lease the van to the partnership for collecting stock. The partnership can deduct the cost of the van from the profit share paid to the partners (the limited company and yourself), and your sole trade can deduct the cost of the lease from your trading profits, while the company can deduct both the van lease costs and the employee costs and all the remaining cash comes to you as the sole beneficiary of the trust.

I'd be happy to quote for the work to set it all up, if that's the way you decide to go.

Thanks (9)
Replying to Tim Vane:
avatar
By Finley
09th Apr 2018 15:40

Hi, thanks, that sounds so complicated !! at the moment, I put down the mileage and offset it against the profit. 45 p etc up 10000.. but if it went through a limited company the 45 p ect could still be claimed against the profit for the company but be PAID out to me... is that right ?? If the whole business was a limited company I could claim the mileage.. It is not a huge business under vat but 10000 miles @ 45 p is a good sum tax free.. appreciate any imput.

Thanks (0)
Replying to Tim Vane:
avatar
By Finley
09th Apr 2018 15:42

Hi, thanks, that sounds bit complicated.., at the moment, I put down the mileage and offset it against the profit. 45 p etc up 10000.. but if it went through a limited company the 45 p ect could still be claimed against the profit for the company but be PAID out.. is that right ?? it is not a large business 'lifestyle' but 10000 miles @ 45 p adds up to a good sum.. any imput appreciated.. thanks..

Thanks (0)
Replying to Finley:
By Ruddles
09th Apr 2018 16:12

You're already effectively getting it tax-free - of your sales income £4,500 is being cancelled by the mileage claim, so those sales are (effectively) not being taxed.

Your logic is about as sound as that of Sir Bedevere

Thanks (1)
JCACE
By jcace
09th Apr 2018 15:57

Finley, at the moment you personally actually pay (say) £2,500 for fuel, plus tax, insurance, repairs etc but get a deduction for £4,500 (say - 10,000 miles @ 45p).
With a company, you will personally pay (say) £2,500 for fuel, plus tax, insurance, repairs etc, and the company will pay you personally £,4500. However, the company can only afford to pay you by invoicing you for more than this in the first place (the "more" being the small profit to which you refer).

Thanks (0)
Replying to jcace:
By Ruddles
09th Apr 2018 16:05

And the "more" perhaps not being "more" enough to avoid adverse tax implications.

Thanks (0)
Replying to jcace:
avatar
By Finley
09th Apr 2018 16:10

Hi, thanks, yes in the instance you give, say the company would pay 10000 for stock invoice it to me for 14500, I would pay the company 14500 and then claim for the mileage allowance of 4500 which the company would pay me. that's my thoughts.. thanks again.

Thanks (0)
Replying to Finley:
By Ruddles
09th Apr 2018 16:20

Utter folly.

Work it through and you'll find that the end result is the same (ignoring the costs of running a company etc).

Thanks (3)
Replying to Ruddles:
avatar
By Finley
09th Apr 2018 17:53

Thanks, I have worked through it many times... yes in both ways the net profit/tax is the same.. but in the limited company proposal the mileage would actually be paid out and received rather than just being as an allowance.. thanks for your comments ...

Thanks (0)
Replying to Finley:
avatar
By andy.partridge
09th Apr 2018 18:08

Brilliant. I would really like you to prepare my accounts and tax return. How much do you charge?

Thanks (1)
Replying to andy.partridge:
avatar
By Finley
09th Apr 2018 19:11

I can't help you I'm afraid, am just after a bit of help as well.. we have muddled along for about 30 years without an accountant and this question just got stuck in my mind.. I have had quite a lot of good input and can put it to rest now.. I would post your own question or try people per hour.. they seem pretty good.. hope this helps.. good luck !!

Thanks (1)
Replying to Finley:
avatar
By Matrix
09th Apr 2018 18:35

Wouldn't the other side of the entry go to your drawings so it is the same difference? I don't see how you are creating cash, the profit extraction is just different in a company.

Thanks (0)
Replying to Finley:
By Ruddles
09th Apr 2018 18:38

Oh dear God

Sole trader:

Goods sold £14500
Cost of goods £10000

Profit £4500
Mileage allowance £4500

Taxable profit/tax £0

Cash in pocket £4500

Company:

Sale of goods £14500
Cost of goods £10000

Profit £4500
Mileage (paid to individual) £4500
Taxable profit/tax £0

Individual pays £14500 to company for goods
Individual sells goods for £14500

Cash in pocket £4500 (less costs of running company)

Thanks (4)
Replying to Ruddles:
avatar
By Finley
09th Apr 2018 19:12

Thanks very much, the penny has dropped now.. appreciate you taking the time..

Thanks (0)
Red Leader
By Red Leader
09th Apr 2018 18:45

Ah yes, limited companies, aka the Magic Money Tree.

Thanks (0)
Tom Herbert
By Tom Herbert
09th Apr 2018 20:32

Thread closed.

Thanks (1)