using personal cc for business purchases

54druids

We have a small business and we have a couple of personal credit cards which we have used as a credit facility for buying supplies since we started but which is gradually coming down. According to our accountant the spending on the cards is seen as a business expense (we do not use the card for any personal items at all) but any interest incurred is not. This seems grossly unfair as non of this is our personal debt. Has anyone any advice is this is correct and if so is there anything that can be done about it?

Kayalana99

You have used your own money to purchase a business item, so you are giving the business the item hence the interest on the CC is not relevant to the business.

It is seen as you giving the business a loan.

Random thinking...

'A' Person lends money to 'B' Business

A charges interest to B

B pays interest to A...

Would it be legal to charge the business interest on a loan aka captial to yourself? I don't know.

Aquamania

54druids wrote: »

We have a small business and we have a couple of personal credit cards which we have used as a credit facility for buying supplies since we started but which is gradually coming down. According to our accountant the spending on the cards is seen as a business expense (we do not use the card for any personal items at all) but any interest incurred is not. This seems grossly unfair as non of this is our personal debt. Has anyone any advice is this is correct and if so is there anything that can be done about it?

I'm not sure I follow you, sorry.

You say you have used your personal credit facility to purchase goods. So why do you not think this is your personal debt?

Are you doing business as a sole trader, or are you operating under the protection of a limited company?

54druids

We are a limited company and since we are relatively new, our business bank will only allow us a minute credit facility until we have some history under our belt. Sorry I still just don't get why we should pay the interest. These are purely business purchases and nothing personal is purchased on these cards. The only difference between this and a business credit card is that effectively we are the bank. The majority of time we manage to pay the credit off each month but just now and again we cant quite manage it. If we had a business credit card then any charges would be met by the company and not us directly so I am struggling to see the difference. Sorry if it appears I am being thick but I am thinking there must be some way around this. The accountant did mention charging the company interest but I think there were tax implications for this.

BTP1956

i would be very careful using a personal c/c for your business

we were ill advised by our business manager at the bank to do this instead of a loan

we ordered nearly £8.000 stock on the run up to xmas2009 a week later the bank recalled all available credit off our card so we couldnt accept goods and the business went bump

are you not eliigable for a start up loan

kind regards btp1956

comeandgo

If you charge your business interest, you then have to declare it as income on your personal tax return and be taxed on it.

Suarez

The business and yourself and 2 totally separate entities.

Anything in the business name is a business liability and anything in your name is your liability.

Aquamania

54druids wrote: »

We are a limited company and since we are relatively new, our business bank will only allow us a minute credit facility until we have some history under our belt. Sorry I still just don't get why we should pay the interest. These are purely business purchases and nothing personal is purchased on these cards. The only difference between this and a business credit card is that effectively we are the bank. The majority of time we manage to pay the credit off each month but just now and again we cant quite manage it. If we had a business credit card then any charges would be met by the company and not us directly so I am struggling to see the difference. Sorry if it appears I am being thick but I am thinking there must be some way around this. The accountant did mention charging the company interest but I think there were tax implications for this.

Wecome back after over 5 weeks

As others have pointed out, you and a limited company are different legal entities. It is usually not wise to try and confuse/merge the interests of the two.

Anyone that receives income such as from interest on a loan needs to declare it and consequently be subject to taxation as your accountant advises. As you say, you are effectively the bank lending money to the separate legal entity of the limited company.

The credit card company will be subject to tax on the interest they earn, and any money you lend a bank (e.g. in a savings/deposit account) will earn you interest which you will be taxed upon. So why do you think earning interest from a limited company should not be taxed?

One possible way around this maybe to declare yourself self employed as a money lender? You will still be subject to tax on the interest you receive, but could then probably lawfully claim tax relief on the interest you pay borrowing that money in the first instance.
There may be regulations you would need to comply with to be a lawful moneylender, but I'm sure your accountant will be able to advise you further on this

Similary, the limited company can claim tax relief on the interest on any borrowings it has to fund the business, as long as that interest is lawfully charged to it.

But remember, the credit card company has no connection with the limited company. The credit card company has lent the money to you; you have then decided to effectively lend money to the limited company.

Aquamania

BTP1956 wrote: »

i would be very careful using a personal c/c for your business

we were ill advised by our business manager at the bank to do this instead of a loan

we ordered nearly £8.000 stock on the run up to xmas2009 a week later the bank recalled all available credit off our card so we couldnt accept goods and the business went bump

are you not eliigable for a start up loan

kind regards btp1956

Why did your credit card provider cancel your personal credit card and require immediate repayment of all debt owed just 1 week after you spent £8k of available credit on it?

In all the years I've held a credit card, I've never experienced this.

I've had credit cards closed on me (but I could still pay off any balance in accordance with the credit agreement)
I've had cards where the available credit has been drastically cut (where I have failed to use the card for several years, despite warnings from them to use the card more often)
I've had cards who have changed their provider, because the original provider no longer wanted to be in the credit card business and/or were in financial issues of their own

But I've never had a card withdrawn and a demand for full, immediate repayment. I thought this only usually occurs to those who are in financial doo-dah's and, for example, attempt to make arrangements with the creditors, intend to declare themselves bankrupt, frequently breach the agreement, etc.


Edit: I've just seen your thread here:
https://forums.moneysavingexpert.com/discussion/4909887
but that is equally vague on the details of your financial issues.
It's perhaps best to confine the details of your issues to your own thread.

54druids

Thanks for all your comments. I now get it!!! We are loaning money to the company but the company did not pay us back on time thus incurring the interest so we could charge interest to the company but then we have to way that up the fact that it will then become a source of income to us which we would have to declare on our tax return so we may not find ourselves any better off. I am assuming we couldn't fine the company for the same reasons. I was reading about dispensations and I don't know if any of you have come across this. I think it is where an employee can claim expenses without it would seem tax implications. It does list credit card payments in its examples. I am an employee and my husband is the director so perhaps this might work. Here is the link so I would be grateful if you would have a look and let me know what you think.

http://www.hmrc.gov.uk/payerti/exb/schemes/dispensation.htm

Aquamania

54druids wrote: »

Thanks for all your comments. I now get it!!! We are loaning money to the company but the company did not pay us back on time thus incurring the interest so we could charge interest to the company but then we have to way that up the fact that it will then become a source of income to us which we would have to declare on our tax return so we may not find ourselves any better off. I am assuming we couldn't fine the company for the same reasons. I was reading about dispensations and I don't know if any of you have come across this. I think it is where an employee can claim expenses without it would seem tax implications. It does list credit card payments in its examples. I am an employee and my husband is the director so perhaps this might work. Here is the link so I would be grateful if you would have a look and let me know what you think.

http://www.hmrc.gov.uk/payerti/exb/schemes/dispensation.htm

Do you only have access to the internet once every 5 weeks?

As the link says, dispensations usually have to be granted by HMRC before a company can take advantage of them.
(Only a very few are considered given automatically)
You still need to be able to prove any such expense was wholly and necessarily incurred in pursuance of the business.

All dispensations are there for is to avoid a company having to report payments made to am employee where tax has not been paid, only for the employee to counter that by then filing a claim that such expense was wholly and necessarily incurred in doing their job.