Limited Company help for a dummy please!

toby_puppy · 14 August 2013 at 11:33AM

I have some queries regarding limited companies.

My husband, a self-employedsole trader who owns a van and now a couple of years later he wants to transferthe business into a limited company, how do you deal with bringing the van intothe limited company?
Does the companyhave to make a physical payment for the van or can it be brought in just as avaluation?

Can it be shown as a business asset in the limited company? What would the double entry be, assuming it was just being brought in at market value?

Do you have to change the logbook to show the ltd company nameas the van owner?

I am assuming that if there is more than one van, it is OKto show more than one van in the company accounts as long as they are propercommercial vehicles?

Assuming the above is OK and the van is now shown as anasset in the company – is it OK to claim any van associated expenses as long asthey are paid for by the company bank account? I am thinking of van insurance, van tax, van repairs. Is actual fuel bought allowed to be claimed for too ifthere are receipts to back this up?

The car that is sometimes used for business purposes – can heclaim mileage allowance for that even if it isn’t shown in the company as an asset?

The other aspect that is confusing is mobile phones.

As a sole trader, he had a contract with 02 in his ownname. I am assuming that he can nolonger claim this as an expense through the company? Would he need a new contract showing theLimited Company’s name and address on it? What if he just kept the phone as it was in his own name but madebusiness calls on it – could he claim reimbursement for these calls through thecompany?

Are landlines installed at the business premises OK to claimfor, ie. Line rental and calls?

I tried looking for a book something along the lines ofLimited Companies for Dummies but they only seem to do a US version. If there is a good book about that can giveinformation without being too heavy going, could you please let me know. I have been googling for answers, but oftendifferent websites give different answers – I just need a basic, reliable bookthat we can dip into for this sort of information – or a downloadable kindleversion.

Thanks .

AbbieCadabra · 14 August 2013 at 11:41AM

we're a Ltd., all expenses for the van are claimed through the business (no personal use though), van is owned by the Company & registered keeper is the main driver. i couldn't explain what you need to record in the accounts as our accountant did it, but when we went from sole trader to Ltd. the van was transferred as an asset. mobile phone really needs to be in the Company name to claim all costs, but many people still have personal contracts & put those thru the business (only a certain amount should be claimed if it's done this way though, much harder to work out).

some basic info here but i think your accountant would be the best person to advise (filing the accounts for a Ltd Co. isn't really a DIY job so you will really need an accountant if you haven't got one already).

nomunnofun · 14 August 2013 at 11:50AM

I am sure that there are reasons why your husband wishes to incorporate - limited protection, tax saving possibly or whatever - the decision should be viewed in its entirety - there will be substantially higher accountancy and filing fees for one thing.

Nevertheless, in answer to your question:

If he does incorporate, it is important to remember that it will no longer be 'his business'. He will be an employee of the company, albeit a director. Any 'wages' that he takes will be subject to PAYE and must be reurned to HMRC, now on a monthly basis.

The van should be valued using an independent valuer. It becomes an asset of the company and no longer wil be owned by your husband. If it is worth £5000, the company either writes a cheque to your husband for that amount or there is a credit to his 'director's current account' with the company. The logbook should be changed.
The company can claim all associated expenditure.

If the company allows any private journeys (including to and from work) your husband, because he no longer owns the van, will be liable to a benefit in kind. The car, however appears not to be purchased by the company, and business mileage claims can be made by your husband, as an employee, to the company.

Once upon a time I know that HMRC struggled to place BIK values on mobiles and, I think, eventually gave up - perhaps someone with more up to date experience can confirm?

The mobile, if to be claimed by the company, must have a new contract in the name of the company with O2.

Remember, if he does 'go limited', the business will no longer be owned by your husband but by the company - most often the most difficult aspect to accept or understand.

Prothet_of_Doom · 14 August 2013 at 12:14PM

how do you deal with bringing the van intothe limited company?

I would write a directors letter to the company accounts, stating that as of a particular date it's value was deemed to be...(with say 10 adverts from autotrader for similar vans) £ XXX and this was to be treated as a directors loan.

Does the companyhave to make a physical payment for the van or can it be brought in just as avaluation?

As and when the ltd company had the funds, it would repay the directors loan, again via a directors letter to the accounts.

Can it be shown as a business asset in the limited company?

Yes, depreciated as per HMRC rules, No idea what they are, but assumed to have zero value when 6 years old.

What would the double entry be, assuming it was just being brought in at market value? You have lost me.

Do you have to change the logbook to show the ltd company nameas the van owner? No real need, the V5 shows the Keeper, not the owner, so whilst the owner is ltd company, the person responsible is the main user. That said most van's will have someone in a big LTD company like the Finance Director as the Keeper.

I am assuming that if there is more than one van, it is OKto show more than one van in the company accounts as long as they are propercommercial vehicles? Yes

Assuming the above is OK and the van is now shown as anasset in the company – is it OK to claim any van associated expenses as long asthey are paid for by the company bank account? I am thinking of van insurance, van tax, van repairs. Is actual fuel bought allowed to be claimed for too ifthere are receipts to back this up? All costs of owning the Van will be met by Ltd company YES. There are implications of using a company van for private use, but somewhere on HMRC website is a guide. Try and find it. If not I'll have a look later. Basically there are implications to your tax code if you have frequent private use, but stopping off to do shopping is allowed. IIRC the personal use of van adds £3K to your own tax liability, so you need to balance the costs of running the van vs the fact that you could keep it private and charge 45p a mile as below.

The car that is sometimes used for business purposes – can heclaim mileage allowance for that even if it isn’t shown in the company as an asset? 45p a mile for first 10K, 25p a mile thereafter, don't forget to get appropriate business use insurance.
I know a builder who takes alot of stuff to the tip in his estate car, to avoid paying to dump it.

The other aspect that is confusing is mobile phones.

As a sole trader, he had a contract with 02 in his ownname. I am assuming that he can nolonger claim this as an expense through the company? Would he need a new contract showing theLimited Company’s name and address on it? What if he just kept the phone as it was in his own name but madebusiness calls on it – could he claim reimbursement for these calls through thecompany?

Just change the direct debit to ltd companies bank account. If it's a contract and you get a number of free calls, and you never go over the limit, then the private calls were free? O2 will not be interested in who pays the bill, or what the contract says, the accounts that go to HMRC need to reflect the proportion of personal calls vs business use. In reality it is often hard to split it up. I make so few personal calls and don't ever get to my call limit in a month, so I let the ltd company pay for the phone.

Are landlines installed at the business premises OK to claimfor, ie. Line rental and calls?

What % age of calls are business, and what are personal? split the bill.
I don't bother with this as I hardly make or recieve any business call on home phone, so I figure that the personal calls I make on my mobile which are free, are paid for by the business calls I make on my home phone. I guess I could work it out, but for me it's not worth it.

I tried looking for a book something along the lines ofLimited Companies for Dummies but they only seem to do a US version. If there is a good book about that can giveinformation without being too heavy going, could you please let me know. I have been googling for answers, but oftendifferent websites give different answers – I just need a basic, reliable bookthat we can dip into for this sort of information – or a downloadable kindleversion.

I have used information on Business link, HMRC and other independent websites, plus talk to friends you know who run a ltd company. If they work in a different field then they'll always help.
When I started I had some good advise from 2 or 3 accountants wanting my business. have to add, I picked the wrong one, based on recomendation, and he turned out to be a muppet. So I'm with someone else who has saved me £2K a year for a £450 a year cost.

Prothet_of_Doom · 14 August 2013 at 12:21PM

nomunnofun wrote: »

Remember, if he does 'go limited', the business will no longer be owned by your husband but by the company - most often the most difficult aspect to accept or understand.

I remind myself that I'm an employee of a company that I happen to own, so I do a weekly expences sheet, as I would expect any employee to do, which pays my 45p a mile etc, just like when I was employed by a big corporation.

Having a separate bank account really helps, as it's clear who 'owns' what.

Tip here for the OP get a side account that pays interest, and pay 20% (or 40% if Vat registered) of all incoming straight to cover any future tax liabilies.

Maiden98 · 14 August 2013 at 12:24PM

One thing to bear in mind if the van is bought by the ltd company, is whether AIA was claimed when the van was purchased.

If it was, and assuming that the pool balance is zero, then a balancing charge could arise which will increase profit and therefore income tax payable.

zygurat789 · 14 August 2013 at 12:33PM

toby_puppy wrote: »

I have some queries regarding limited companies.

My husband, a self-employedsole trader who owns a van and now a couple of years later he wants to transferthe business into a limited company, how do you deal with bringing the van intothe limited company?
Does the companyhave to make a physical payment for the van or can it be brought in just as avaluation?

Can it be shown as a business asset in the limited company? What would the double entry be, assuming it was just being brought in at market value?

The car that is sometimes used for business purposes – can heclaim mileage allowance for that even if it isn’t shown in the company as an asset?

Judging by your post you are going to need an accountant to prepare statutory accounts and filing statements. You need take advice from him on wether or not to trade as an Ltd.

The van should be valued, I would suggest a PX quote and the double entry would be Dr asset a/c - van Cr Director's current a/c, this is effectively a bank account with the company and any monies in it can be taken tax free because only taxed monies ie net salary declared but not drawn and declared dividends can be credited to it.

Don't put the car into the Ltd the BiK would make it uneconomic just make an expense claim for mileage. First 10,000 in a year 45p all the rest at 25p.

toby_puppy · 14 August 2013 at 12:44PM

wow, thanks for all helpful replies - really has pointed us in the right direction.

will take some getting used to that the business is not owned by husband, that it's owned by the company.

malc_b · 14 August 2013 at 12:46PM

Prothet_of_Doom wrote: »

Are landlines installed at the business premises OK to claimfor, ie. Line rental and calls?

What % age of calls are business, and what are personal? split the bill.

This is incorrect. You need to check out HMRC's rule book for employee benefits. It will be somewhere below here

http://www.hmrc.gov.uk/thelibrary/manuals.htm

Self-employed is different. Then you are allowed to use the same phone and just split the bill. An employee working from home can only charge for calls, if they can be separately identified on a home phone, not any of the home phone rental. You would need a separate phone line exclusive for the business.

However, the work around for this is to charge the ltd co room rent and include in that free telecoms (presumably you could do the same for mobiles and perhaps rent the van too). You lose claiming the VAT back on the phone calls but then if you are on fixed percentage VAT you don't claim back VAT anyway.

You need to declare income from property on your self-assessment form since basically you are a self-employed property owner renting out this room and facilities. You declare the rent as income and the expenses as loses and make say a small profit on which you pay income tax. You can then claim heating, electric, mortgage interest, rates proportional to the room vs the whole house.

Note that you need to use this room for both business and home use, since if a room is solely for business it then becomes liable to capital gains tax. Part home/business is exempt from capital gains. So do you home accounts in the same room say.

You will need separate insurance for the ltd co. Often these have a tax helpline which can advise you.

AbbieCadabra · 14 August 2013 at 12:54PM

please don't let accountancy costs put you off going limited. we now pay a similar amount to what it cost for sole trader accounts/records when they were done over 10 years ago.

we used a local accountant for years without question, sole trader then Ltd. Co. it wasn't until I started being more pro-active online that i realised we were paying way over the odds for the service we needed. our accountants were pretty much performing a full audit for each years accounts & charging us around £1500. this service simply wasn't required & wasn't suitable for our needs, but we didn't know enough to even question this.

we now use an online service & pay £55 per month for a service that is suitable for our needs, & we get a far better service if there are any queries. responses the same day, instead of waiting anything up to 5 days for a reply from the old local accountant (technology wasn't their thing, they didn't really like email & waited until the very last date to comply with any new technology/online filing requirements).

Ltd. does have it's benefits, but it's all down to individual circumstances as to whether you'd be better off than sole trader.

Limited Company help for a dummy please!

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