Bank mistake - directors' loan?

[Robbyell]

Hi all

First time poster, long time listener!

I started a company last March and had my first invoice paid into my personal account as the business account was not set up in time. I paid this figure across into my business account. The client then continued to pay into my personal account and I didn't transfer the later amounts (>£5k) across, thinking I'd do it at year end (now). I'm now concerned that things may not be as simple as that as I may have unwittingly "taken out a directors' loan" for which HMRC may want Income tax on a BIK or alternatively Corp tax on notional interest the company should have earned. Any advice? Is it just a choice of:

Calculate a BIK or an interest figure & pay tax on it
Pay the money back into the company and say nothing to HMRC?

- or are there other options. It's an innocent mistake, but I'm not sure HMRC would see it that way. All comments very much welcomed.

[Wanderer]

Calculate a BIK or an interest figure & pay tax on it
Pay the money back into the company and say nothing to HMRC?

- or are there other options. It's an innocent mistake, but I'm not sure HMRC would see it that way. All comments very much welcomed.

Get your payments changed over to the proper account straight away. And understand that your company is a legal entity with it's own assets, quite distinct from you - you can't just take it's money...

You've probably gone past the company year end - you should have taken action before that.

You can probably account for the money as director's loans but you should get an accountant to sort this all out for you and put you on the straight and narrow.

You can pay it back with interest at the HMRC approved rate and this interest becomes profit for your company which it then pays CT on and distributes back to you so you get most of it back.

Make sure you don't keep the loan later than 9 months after the company year end or you will pay a big tax charge on it see the HMRC guidance.

I'd recommend that you contact one of the helpful accountants who post here and ask them for a quote to sort your affairs out and do your accounts for you. They can also get you setup on some book keeping system so you can see exactly how much money is yours that you can draw from the company and how much is the company's and set aside for CT and VAT.

If you are not already VAT registered then ask about doing this and joining the flat rate scheme.

All this is presuming you haven't spent all the company's money and you still have the cash to cover it's liabilities, if you have spent it all then you will be in big trouble.

[northernladuk]

Calculate a BIK or an interest figure & pay tax on it
Pay the money back into the company and say nothing to HMRC?

- or are there other options. It's an innocent mistake, but I'm not sure HMRC would see it that way. All comments very much welcomed.

They will certainly not see it that way. As a director you have a legal requirement to run your finacial affairs properly. There are enough guides and accountants to make sure you don't so ignorance is no defense, in fact if you show you are incompetent at running a company your are inviting even more trouble.

One golden rule now you have a business... the company money is the companies money, your money is yours. There is no cross over or grey area.... period.

[Greg@CapitalCity]

Calculate a BIK or an interest figure & pay tax on it

I agree Wanderer - if the funds were taken as a loan, pay interest on the amount to your business, and pay Corp Tax on that interest - and then just put that one down to experience. Also, if this company has been your only source of income for 2011/12, then once you know your company financial position, vote some dividends to release some/all of the loans before 05 April 2012 - just to ensure you lock those dividends into the 2011/12 tax year.

I suggest you pay attention to the paperwork - the HMRC could easily take the view the payments that went into your personal account should be taxed as income, on which PAYE/NI would be payable.