The owner/director of the restaurant where I work takes a lot of money for personal use. It is a limited company and so the concept of drawings - as far as I am aware - doesn't exist.
She takes both cash and uses the company debit card. I've pointed out she should take these amounts as wages but she's not prepared to as she's currently getting divorced and doesn't want to show an income stream.
However I have to account for these in my bookkeeping in some way that she can see how much she's taken so at some point in the future, pay it back.
Any cash that she withdraws from the business or personal purchases she makes through the debit card should be debited to her director's loan account.
It may be that she has a director's loan account that's in credit (i.e. the company owes her money) and these withdrawals will count as repayments of this loan. If this is not the case, then she may have an overdrawn director's loan account, which can have benefit in kind and corporation tax implications. If she's not aware of these potential tax issues, then you should get her to talk to her accountant about her situation.
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Pearce & Co - Chartered Accountant and Chartered Tax Adviser
Hmmm, seems like standard money laundering to me. When I worked for HMRC we received many SAR's (Serious Actvity Reports) from accountants about this type of thing. You could note it as dividends, but if she is not taking a wage then this would also be dodgy as she should be paying PAYE/NI like the rest of us. Did she take a wage last year, if this is a new trick she could be reported by her ex. His solictor should have reported this as a duty bound reporting proffession. Many frauds get highlighted by divorces, one party tries to hide assets only for the other to report them!
It is quite normal in practice for a director to use the business account of a Ltd Co as their own, and for these transactions to get recorded in the DLA. Totally wrong, and extremely difficult to keep track of.
In this case however the director is trying to hide income, so would agree that it does sound reportable
Good to have the view from HMRC's side of the fence on the forum.
I cannot see this case as money laundering yet as the poster does not state that they have yet hit year end so as it's a limited comapny it would be quite legal to declare a dividend from profits to clear the DLA.
Paying less tax and NI of course would be down to better tax planning rather than tax evasion so nothing illegal would have been commited provided that in some way the DLA is cleared properly by the period end.
As for this being mixed up in a divorce case if the soon to be ex's legal representation had anything about them they would be demanding an independant audit (not a full statutory one) to determin the financial status of the spouses business.
The key though is that there is no way that at the period end the wife can legally show that she had no income stream and that is where it would slip into tax evasion and hence money laundering.
So, I'm not disagreeing with you that it could become a money laundering crime, just on the timing as to when this moves from misuse of a DLA to an actual crime.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
think that we said the same thing but as usual I went the long way around it (but only missed pole position by a minute this time ).
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Yep but sometimes more is actually more, and your expanded answer filled in the blanks of mine.
I would say Linda, that you should record the transaction in the Directors Loan Account, so you would Dr the DLA and Cr the Bank/ petty cash/ credit cards, and note that it was a personal purchase in the details box. You can guarantee that if the proverbial hits the fan, it is always the friendly bookkeeper that gets caught in the crossfire. Bit like in the movies, you always know that the really nice guy with sense of humour is going to meet a bad end
Been a bit busy lately Shaun, so keep darting in and out, making brief posts here and there. Been a bit remiss in welcoming new people so try to catch up now and then
Thanks everyone for your responses. I was well aware that her actions had tax implications and could be considered tax evasion - but as for money laundering - phew!! That sounds very serious.
I've notified her accountant - he is well aware - so I feel I've done my bit.
I'll post her outgoings to the directors loan account as suggested - only things is I don't have one. I'm using Sage - I have a nominal account 7002 - directors expenses. Would that be it?
Also while we're on the subject - the restaurant manager often takes subs of money from the safe for his personal use - not large amounts - probably £100 a month. I don't class this as theft as he writes it down for my attention and the owner is fully aware. I need to keep a log of these of these 'subs' - so I can ask for them back. How do I account for amounts taken from the business by a member of staff. Its the same situation as the director - only he's not a director. What account would I post these 'subs' to and should I raise an invoice every time he takes one to class him as a debtor to the business.
it's not an expense and you don't want it to end up there in the accounts.
Set up a new code for the DLA.
I'm not a Sage user (or at least most of the time I'm not. Did use it for my ICB exams) but I would think that the new code needs to be in the 12XX range. I'll leave it to one of the many Sage power users on here to fill in the details on that one.
The restaurant manager would be taking the money from Petty cash and should be suitably reimbursed to the petty vash from the managers salary.
It's unusual for that to be allowed but simply consider it as an advance on salary and the only place really that could come from is the petty cash float.
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
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