Directors Account ./ Start up Costs.

[pierretopping]

Hi,

A quick question if I may. My Ltd Company at the end of its tax year will have approx 10k in the bank. The company owes me 6k on the monies I put into the company on start-up. I take it this money in now in the directors’ account.

My question is if I now take my money out (6k), and leave 4k in the company, how much Corporation Tax would the company pay. Is it 19% on the 10k, or 19% on the 4k (I’ve assumed no expenses, just to make thinks a bit easier).

Also, I’ve been told that I can claim for “start up costs” upto 6 years before the company was formed. If this is correct, does the value of these go into the directors account or put thru on expenses?

Thanks

[oraclesmith]

If you take the £6k back out, then the company only pays corporation tax on the £4k which is left - ie. it's profit - assuming there are no other expenses, overheads etc to be paid. Have you remembered home-office costs, equipment, stationery, outstanding VAT or other debts to be paid etc? You should make sure your directors loan account is cleared if possible by end tax year or there can be interest/benefit issues.

Startup costs and anything which directly contribute towards the starting up of the company, eg. company formation fees, website, stationery, equipment. So long as these costs are legitimate (see HMRC guidance), receipted and recorded in the company accounts you can get the money back for them as well (assuming you paid from your own pocket before the company had a bank account etc). They are entered into the main account under the correct heading (eg. overheads->stationery) with the credit going to the directors loan account. You then clear the directors loan account with a payment out to self from company bank account. The DLA is often set up as a 'bank account' in accounting packages so you do a bank account transfer and make a cheque out for the figure to yourself. Well at least that's what I do.

[ASB]

If you take the £6k back out, then the company only pays corporation tax on the £4k which is left - ie. it's profit - assuming there are no other expenses, overheads etc to be paid. Have you remembered home-office costs, equipment, stationery, outstanding VAT or other debts to be paid etc? You should make sure your directors loan account is cleared if possible by end tax year or there can be interest/benefit issues.

Startup costs and anything which directly contribute towards the starting up of the company, eg. company formation fees, website, stationery, equipment. So long as these costs are legitimate (see HMRC guidance), receipted and recorded in the company accounts you can get the money back for them as well (assuming you paid from your own pocket before the company had a bank account etc). They are entered into the main account under the correct heading (eg. overheads->stationery) with the credit going to the directors loan account. You then clear the directors loan account with a payment out to self from company bank account. The DLA is often set up as a 'bank account' in accounting packages so you do a bank account transfer and make a cheque out for the figure to yourself. Well at least that's what I do.

What the oralcle says is correct if the 6k represented expenses - which was the example given. however if the 6k represented working capital it will make no difference.

If the position was:-

you sub 6k so the company has some working capital.
the company invoices 20k
salary and exenses are 10k
profit 10k
chargeable to corp tax 10k @ 19%

In this case you will simply be a creditor of the company of 6k - you can take this at any time.

The fact that you have injected capital into the company does not of itself affect the company profit (which is what tax is paid on).

[pierretopping]

Thanks

Thanks all. Now it makes 100% Sence

[Nixon Williams]

Remember a company pays Corporation Tax on its profits NOT what cash is in the bank account.

Profits are basically calculated taking all the expenses from the company income, the amount of cash does not come into it.

Alan