My client is a shareholder in Ltd Co which has only traded for under a year and not got a credit rating. He has a lease agreement in his name (not the company) and being paid for from his bank for a pool car for the company. He wants to be reimbursed from the company for the monthly payments and initial payment. We use Sage and wonder how I will account for this in the company accounts.
Treat the payments as though made to the company and paid by the company rather than paid from their own account.
(The director is effectively loaning money to the company which will be offset against the money that they take from it).
The more complex issue associated with this is that the lease is in the directors, not the companies name and HMRC could legitimately say that the lease is nothing ot do with the company but is rather a personal lease.
Is the car itself registered in the companies name and insurance shows that all members of the company can drive the car?
Is there anything other than incidental non company use of the car. i.e. storing it at home rather than the office. Or is it to all intent and purpose used as the directors personal car but called a pool car in an attempt to avoid being taxed on it?
If the latter case I see a time in the directors future where they may have a visit from HMRC where the director is told to drop their trousers, bend down and touch their toes. lol.
More seriously, take a look at the complete picture over the "pool car" to determin how a reasonably informed third party with no prior connection with this client might judge the economic reality of it.
kindest rgeards,
Shaun.
p.s. I expect this discussion to leave your initial question over recording the transaction and concentrate upon whether this is actually a pool car. I assume that the director has another car and they are not the only person in the company?
__________________
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.
He is a shareholder but not a director and any work he does for the company, he invoices as a self employed contractor. There are two more directors but they have not put any money into the company.
When this scenario was put to me I cringed. The vehicle has the company logo all over it and I have suggested that the company insure it for all staff to drive but I can see this really coming back to bite. Thanks for you input Shaun.
