Using personal bank account for Ltd company?!

thenudeone

w211 wrote: »

Self employed sole trader, been using my personal account for years.

Not relevant to the OP who was asking about a limited company.

thenudeone

Have a look here:

http://www.brighton-accountants.com/blog/company-bank-account/

The blog recognises that sometimes personal accounts are sometimes used for limited company accounts (without commenting on whether this breaches bank T&Cs), then goes on to explain why it is a very bad idea. In particular:

Where a person is holding money on behalf of the company, he is borrowing money from that company. This is likely to be the case where a person’s own bank account is being used as a company bank account and the account is in credit, even if the only transactions on the account are company ones. Borrowing money from the company can be illegal under the Companies Act 2006. It can also lead to additional tax liabilities in the form of Section 455 tax, and tax and National Insurance on beneficial employee loans.

bazzyb

Mattygroves2 wrote: »

That might be fine for a sole trader or even an employee but we are talking about a Director (I assume as they set the Company up) and a Limited Company so any funds the Director holds in behalf of the Company become a Directors Loan which has got tax implications for both the Director (P11D Benefit in Kind) and the Company (Corporation Tax) if not paid back within 9 months of the Company year end.

Not necessarily if acting as bare trustee.

Mattygroves2

bazzyb wrote: »

Not necessarily if acting as bare trustee.

Good luck with getting that past HMRC. The rules are very clear for Directors Loan Accounts.

jjlandlord

Rules are very clear re. directors' loans, indeed.

But IMHO there's a difference between what is suggested here (though very bad practice) and a loan: There is no payment made to the director, the money is not for the director's personal use, and it transits on the account for business purposes only. Thus, as mentioned previously it is not straightforward that there are any withdrawals from the company taking place.

Of course, amongst other issues, it opens the door to arguments with HMRC and should be avoided.

bazzyb

Mattygroves2 wrote: »

The rules are very clear for Directors Loan Accounts.

Agreed, which is why there would be no implications for bare trustee, as there is no director's loan involved.

However, this is a complicated way to do things and has previously been suggested may well be against the terms and conditions of a personal bank account. I still maintain that it would be far easier to have a separate dedicated business account. I am merely pointing out that it is not illegal or impossible for a limited company to use a personal account - well, at least in theory there isn't.

System

I don't believe that a bare trust can be used in this manner. The beneficiary needs to be a person, not a legal entity

Pennywise

jjlandlord wrote: »

There is no payment made to the director, the money is not for the director's personal use, and it transits on the account for business purposes only. Thus, as mentioned previously it is not straightforward that there are any withdrawals from the company taking place.

I don't recall any post from the OP saying that they've not taken any "company" money for themselves. In fact from what they first said, it sounds as if they have made private drawings from the account, so that's really muddied the waters and would make it very difficult to argue it was company money held under a bare trust wouldn't it, especially if, as seems likely, they havn't documented the withdrawals as dividends covered by directors minutes and share dividends! HIs it even a separate personal account I wonder or are they using their personal account which they use for day to day private transactions? Furthermore, if they've paid any private bills from the "company" bank account, then that's even less chance of them getting away with calling it a bare trust as it makes it look more like they've just regarded it as another personal account. Without knowing the facts, no-one can say and the OP doesn't seem keen on coming back to give more information.

System

Also there is a major conflict of interest in that the ONLY trustee is also the (only?) director of the company that benefits and possibly HMRC would then consider all moneys as being company money