I am a little confused as to whether incorporation fee is considered to be incurred on behalf of a company and, therefore, stays out of P11D or is it considered as normal wholly and exclusively incurred for running a business and needs reporting on P11D as there is no dispensation. Would be very grateful if somebody could shed some light on this.
To my knowledge, the incorporation fee will be shown as an expense in the company but disallowed for tax purposes. The company paying for it, should not mean that it falls as something that would be considered a benefit to the director.
In my time in practice, I have never seen formation costs put on the balance sheet, simply disallowed. It might be that one the sale of the limited company, that the cost becomes chargeable on the CGT comp.... but I have never been involved in a CGT comp for the sale of a company. Hopefully someone else will be along, who can confirm how they treat this sort of expense, and whether they agree with my treatment. Generally my companies have paid small amounts (£20-50) online to set up the company, rather than large bills to formation companies or accountants, so I have never given it too much thought.
I have always taken formation costs as the director loaning the money to the company for it to form itself and the formation costs (which as you say Michelle are pretty immaterial) are an expense of the company and nothing to do with the director who simply loaned the company the money to purchase itself.
The whole concept follows the general idea of the company being a totally seperate legal entity rather than an extension of the owners.
I appreciate that there is also the nominal payment for the share capital but I keep and think of that totally seperately not least as the £100 (or whatever the sum chosen) very seldom gets deposited in the company in exchange for the shares but rather ramains a virtual payment.
As soon as the company is trading properly the director can be reimbursed the loan without going anywhere near a P11D.
kind regards,
Shaun.
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Shaun
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