Can I put business money into an ISA?

jacu2010 · 3 November 2010 at 1:29PM

I'm a sole trader with a small business.
To date I have not taken any income from the business but am slowly building up a cash cushion.
But, by doing that, I'm getting quite a large balance in the current account I use for my business and want to move some of that cash into a savings account so that I get a better rate of interest on it until such time as I either use the money to make further business purchases or decide to take some/all of it as income (in which case I'd declare it and pay tax on it in the usual way).
Can I put that "spare" business cash into an ISA?
I see that I'll be using up my personal allowance (£5100 per annum) with business money, but am unlikely to use up my allowance with 'personal' money this year so not too bothered by that.
Does it matter though, that the same ISA would contain some 'personal' money and some 'business' money? Or, would it be better to have a separate ISA for the business money so the two pots did not get mixed?
Are there tax rules that say you cannot put business money into an ISA?
I'm thinking that as long as I keep good records of where the business money is stored it shouldn't be a problem.....but have a sneaking suspicion that there might be rules against this but can't find any information about it.

Anyone know?
Thanks

Baldur · 3 November 2010 at 1:48PM

An ISA is an Individual Savings Account, and you make a declaration on opening one to the effect that "All subscriptions made, and to be made, belong to me", so clearly does not apply to business monies.

jacu2010 · 3 November 2010 at 1:55PM

Thanks for speedy reply!
See what you mean, but will that apply when
"Being a sole trader means money from the business is in your name and so can be moved into accounts opened by you" (quoted from business savings section of moneysavingexpert.com)
?

Lokolo · 3 November 2010 at 2:03PM

I disagree with Baldur (thats a first!

), as a sole trader all money is yours and you are fully liable any debts, so in this case I think you could.

However, you might want to ring up HMRC and ask.

anniecave · 3 November 2010 at 2:06PM

The money in the business may be in your name, but that doesn't mean it belongs to you. If it belongs to the business, then you need to treat it a such. Sure no-one may stop you making such a transaction, but you can probably do lots of incorrect things in the course of running a business, including theft, tax evasion, and misleading your customers, but that doesn't make any of those things right!

I would wait until near the end of the tax year, then if you do want to take this action, then you can take it out of the business then in the legal way, declare it, pay tax on it, etc, then pay it into the ISA just before the end of the tax year.

baby_fuzz · 3 November 2010 at 2:09PM

could the OP not 'pay themselves' out of the business, the value of £5100, then invest it as they choose. If an when it needs to go back into the business, they could bring the money back in as additional funding / seed money.

opinions4u · 3 November 2010 at 2:46PM

I'm with Lokolo on this.

Yes for a sole trader.
No for a limited company.

jimjames · 3 November 2010 at 2:49PM

anniecave wrote: »

I would wait until near the end of the tax year, then if you do want to take this action, then you can take it out of the business then in the legal way, declare it, pay tax on it, etc, then pay it into the ISA just before the end of the tax year.

But it isn't being taken out of the business - it is just being moved from one account in the name of Mr J Bloggs to another account in the name of Mr J Bloggs at a different bank.

As long as the business accounts still show the amount as being a business asset then there should be no problem.

jacu2010 · 3 November 2010 at 3:03PM

Good thoughts all.

I followed your advice Lokolo and just phoned HMRC.

They said that to put it into an ISA, I need to take it out of the business (therefore declaring it as income, paying tax on it etc) and then I could invest it in an ISA as it would be effectively 'personal' money. So, even though I'm a sole trader, they would view it as business money and so they don't like that.

I'm not trying to do anything dodgy here - perfectly happy to pay tax on it as and when I take it as income, but I don't want to take it out of the business just yet. Just want somewhere to store it that gets a little more interest until a time when I take it as income/make further business purchases etc.

So if ISAs aren't an option, what other options do I have for leaving the money in the business but getting higher interest on it?
Can I just open any regular savings account (where I pay tax on the interest)?

The other option (as baby_fuzz suggests) is to take the money out of the business as income, invest it as personal money in a savings account or ISA or anything else, leave it untouched, then bring it back into the business as and when required. I was trying to avoid all the transactions/paperwork that involves though, as will then have to declare it, then offset it again if it goes back into the business - not really difficult, just trying to keep things REALLY simple and minimise the amount of to-ing and fro-ing.

Can I put business money into an ISA?

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