The title says it all, really. If a company with two directors has been buying goods for the business using their own credit cards how is this recorded?
My guess would be that it's:
Dr Expense account (e.g. phone and internet)
Cr Director's Loan account. (A separate account for each director)
Is this right?
Thank you, as always, for your help.
-- Edited by HumanShale on Thursday 4th of July 2013 09:21:55 AM
Some go down the direct route as you suggest and others divorce the injection of capital from the expense to which it relates but the result is exactly the same.
A more fundamental issue though is the pointless P11D that this creates in that unless a dispensation is in place the reimbursement should be declared as a benefit even though no tax is payable on it.
Of course P11Ds are seldom created for this as no tax is due but could if you get an inspector who cannot find anything more substantial to justify a visit generate a fine.
And thats why we try to get business owners to use company credit cards rather than recycling throught he DLA.
HTH,
Shaun.
p.s. edited because paragraphs disappeared again. I've sussed that I can only keep paragraphs if I use the advanced editor and preview before submitting.
-- Edited by Shamus on Thursday 4th of July 2013 09:46:47 AM
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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.
Hi
Yes, think of it as expenses reimbursement, as long as the goods being purchased are for the business (wholly and exclusively..) then dont forget the VAT if applicable.
HTH
Jeremy
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I had to take a telephone call mid response so despite the timing difference your response wasn't there when I started writing.
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.
I have a client who uses a credit card for business purchases. However this credit card is in her own name and registered to her home address, so strictly speaking this is a personal credit card. She uses it purely for business purchases and I pay quite a lot of bills using it. Should she really be swapping this for a business credit card? I have mentioned to her about changing it for a business credit card as I said if the business were unable to pay the balance, she would be liable personally, but I think she was worried about the costs of a business card.
its personal financing of company expenditure and the debt belongs to the owner of the card, not the business.
You can pay interest on money loaned to the company equivalent to the interest paid on the card but such becomes a P11D item.
It is not the problem of the business that the owner of the card bore interest because they could not afford to repay the debt within the interest free period.
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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.
p.s. thats quite different to a business owner taking out an actual loan wholly, necessarily and exclusively for the purpose of the business. For example a mortgage on business premises.
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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.
They used the credit cards exclusively for the business because of cash flow problems. They didn't have them before and only took them out because of this problem.
Does that still mean the interest is not a business expense? I'm looking for the principle here for the general case to help my understanding as much as anything.
The cards do meet the criteria of being, wholly, necessarily and exclusively for the purpose of the business.
Thanks for your help. This forum's got a great community.
