Ltd company - bills in business name only??

Tea3

I am in a business parnership with husband for several years, at present the business mobile phones etc are paid direct debit from business account and invoice/bill put through accounts as normal. We are due to go ltd company in a few months and been told by accountant we cant put things through account/business bank account unless they are billed to the limited company and not in our own names - is this right? And if so why? There are a few things in our name that go through the business bank account (all valid expenses with receipts/bills) but it would be a pain to change all these to come out of our personal account and then claim back as expenses etc. The companys involved wont change bills to business billed as this is more expensive and we are in contracts so they consider the 'change of name' as a new contract.

Rolo_Tomasi

A Limited company is a separate legal entity so all bills should be addressed to it. If the contract is in your personal name and the company pays for it then it is classed as settling a personal liability and so should be taxed on you personally. You would offset the tax charge on this by including a claim for business related expenses.

As you say - this is a pain - but it is also the rules. From your suppliers point of view, their contract is with you personally so if you do not pay them they can take you to court. If the contract is in the company name it is much more difficult for them to enforce payment and this is reflected in the higher costs.

You need to weigh up the ease of administration against any cost savings.

Horace

If you set up a limited company then you are an employee of the company as well as being the owner - therefore any goods/services purchased by the limited company must be billed to the limited company.

A limited company is different to being a 'sole trader' in that the company pays wages (the tax and NI on those wages), corporation tax, VAT etc. If you buy something e.g. a train ticket or whatever - either the company orders it and pays the invoice or you buy it from your personal account and claim back the expenses.

The mobile phone contract or whatever it is would be classed as a new contract because it is something that would be taken on by the company and therefore the suppliers see the company as a new customer regardless of whether or not you have been their customer on a sole trader basis for a long period. They are no longer dealing with you as a person but the company and the company is now the client and therefore its a new contract.

ciscosurplus

I would also advise that if you do go down this route, that the mobiles or whatever are "wholey and exclusively for business use", any hint of personal use and you enter into BIK (Benefit in Kind) on your P11D, which of course means you pay tax on the value of the benefit.

When I first setup a Ltd company I asked to transfer a mobile contract to company name, they changed the price plan slightly and company took on the liability of the contract.

Pennywise

The tax inspectors love people who don't follow the rules when using a limited company - it's like a goldmine for them. Not only do they hit you for benefit in kind tax and NIC on the benefit in kind, they then hit you with £100 per month fines for making erroneous PAYE submissions.

With a mobile telephone, for example, there is no taxable BIK if the company contracts for the phone and provides it to the director, even if it is used for personal calls as well. However, if the director contacts and pays for it himself, he can only claim the "marginal" cost of the business calls - i.e. no claim for private calls nor the rental. Worse still, if he contracts personally and the company pays, he may be liable for both tax and NIC on the benefit in kind and also NIC on the full amount as the company is settling a personal liability of the director, hence full NICs apply.

If you want to go ltd to gain the benefits of being a limited company, you can't just pick the bits you like and ignore the bits you don't. The fines and tax/nic can be huge if you get it wrong. You either need to research all the implications yourself or you need a good accountant on board to keep you complaint. If you aren't good at being organised, following rules, etc., then probably best not to go down the ltd route.

ciscosurplus

Pennywise, not always strictly true. I run a business from home (ltd company) and reclaim the difference between a personal and the cost of my business broadband. This did trigger an investigation (broadband and internet costs), however the tax inspector was 100% satisfied that this was within the spirit of things and most cost effective for the company.

Surely having the phone even if declared a BIK would have nothing to do with PAYE and would be related to the P11D submission and the responsbility of the individual doing a Self Assesment to declare?

For example my fuel card I dont pay the TAX until SA based on the BIK declared on P11D.

Mr_Taxtastic

The trouble is that some Inspectors are not always reasonable and they are well within their rights and powers to penalise people who do not follow the rules as Penywise says. A harsher Inspector could have landed you with huge fines for an incorrect or non-existant P11D.

P11Ds are part of the PAYE system and the information on the P11D allows HMRC to adjust a persons PAYE code and collect the tax on any benefits in kind dircetly though their salary. This is how the tax is collected on benefits for most people as the majority of people do not complete Self Assessment Returns.

The mobile phone benefit highlights the situation, why sacrifice a tax free benfit and impose a compliance nighmare just because you do not want to change of a name?

tjanec1212

My situation is different. I have all of my purchases in my company's name but I am paying them with my personal credit card, so I can build up all the cashback rewards and don't have to pay annual fees for normal business credit cards. Every month I set up direct debit from business current account to pay the balance on that peronsla credit card. That personal credit card is exclusively used for business purchases and I don't mix that up with my personal expenditure. Please advise if this is acceptable.

Tea3

Mr taxtastic - Its not that I dont want to change the name its that I am tied into an 18 month contract in my name and the phone copany would see a contract to the ltd company as a brand new 18 month one meaning for the next twelve months I would have to pay both! I have my own payg phone for personal use and the contract one is solely for business use. I will be using my account for all payrol stuff so no doubt he will sort out this BIK stuff but he had said phone in my name could not go through business even if it is a second phone just used for business. Can I not pay it myself and then reclaim in full as an expense through the business? I can show hmrc etc my own phone with seperate phone number etc to show i have one for business and one for personal. Also we will still be completing self-assesment returns each year (accountant also dealing with those).

paulwf

tjanec1212 wrote: »

My situation is different. I have all of my purchases in my company's name but I am paying them with my personal credit card, so I can build up all the cashback rewards and don't have to pay annual fees for normal business credit cards. Every month I set up direct debit from business current account to pay the balance on that peronsla credit card. That personal credit card is exclusively used for business purchases and I don't mix that up with my personal expenditure. Please advise if this is acceptable.

Are you a sole trader or running a Ltd please?

Mr_Taxtastic

Tea3 wrote: »

Mr taxtastic - Its not that I dont want to change the name its that I am tied into an 18 month contract in my name and the phone copany would see a contract to the ltd company as a brand new 18 month one meaning for the next twelve months I would have to pay both! I have my own payg phone for personal use and the contract one is solely for business use. I will be using my account for all payrol stuff so no doubt he will sort out this BIK stuff but he had said phone in my name could not go through business even if it is a second phone just used for business. Can I not pay it myself and then reclaim in full as an expense through the business? I can show hmrc etc my own phone with seperate phone number etc to show i have one for business and one for personal. Also we will still be completing self-assesment returns each year (accountant also dealing with those).

Sorry my statement was a bit blunt as it was Janaury and I deal with my worst lazy/unorganised clients in January.

There is, of course, the financial aspect whch can restrict putting items in the company name. A fair few of my clients have struggled to get finance in the company name so have taken the debt on personally with the company making the repayments. This however causes a number of negative tax issues but it was the only option open to them.

The Company can pay your mobile phone bill although this would have to go through the payroll for NI and on the P11D for tax. You can then make a S336 claim for the tax side but not for the NI.

The alternative would be to bill the company for the cost of the calls which would not go through the payroll so no NI, but would still need to go on the P11D and again a S336 claim made. This can be difficuilt with inclusive minutes etc in the line rental.

The third choice that I can thing of (which many prefer) is to wing it, let the company pay for it all and hope that there is no enquiry or you have an understanding inspector that will allow a 100% business use claim.

Some people may offer other advice as the whole dealing with P11Ds is very varied in my experience. Plus I may be a little rusty as I avoid P11Ds and Payroll at all costs.