Transfer of personal assets to company

Discussion in 'Accounts & Finance' started by FreelanceSoftwareDeveloper, Sep 23, 2009.

  1. FreelanceSoftwareDeveloper

    FreelanceSoftwareDeveloper UKBF Newcomer Free Member

    Posts: 1,562 Likes: 348
    Hi,

    I have a number of business related assets which I purchased with my own money prior to company registration, whilst still researching the viability of the business.

    I am now interested in transferring these to the business, for the purpose of reclaiming VAT.

    What is the process for this? And how do I account it?

    I would also like to know how I invest money into the business, I have £3000 initially to 'give' to the company. Again, what's the correct way to account for this? Can I loan it the company and then reclaim it once in profit without paying tax, this is my persona earnings which I have already paid tax on.

    The company is Ltd, I am the sole director.

    Regards,

    Matt
    Posted: Sep 23, 2009 By: FreelanceSoftwareDeveloper Member since: Sep 14, 2009
    #1
  2. CassioAcc

    CassioAcc UKBF Newcomer Free Member

    Posts: 960 Likes: 237
    Pre incorporation expenses can be recorded as a Directors loan and agaisnt the relevant expense / asset.

    The £3000 will also be treated as a Directors Loan

    The balance of the directors loan account can be wathdrawn tax free at any time
    Posted: Sep 23, 2009 By: CassioAcc Member since: Mar 17, 2008
    #2
  3. FreelanceSoftwareDeveloper

    FreelanceSoftwareDeveloper UKBF Newcomer Free Member

    Posts: 1,562 Likes: 348
    Thanks Aaron, that makes sense for the £3000 but not sure how it works with physical assets?

    For example, I have a power supply which lets say cost £115. I bought this myself to do some R&D work which is related to what now is a company. The power supply will only be required for comapny business.

    If I want to claim the VAT back on the £115 it doesn't make sense that it could be accounted for as a director loan?

    Please could you clarify how it works?

    I have some other pre-incorporation expenses such as website registration and design software which I would also like to reclaim VAT on if possible.

    Regards,

    Matt
    Posted: Sep 24, 2009 By: FreelanceSoftwareDeveloper Member since: Sep 14, 2009
    #3
  4. CassioAcc

    CassioAcc UKBF Newcomer Free Member

    Posts: 960 Likes: 237
    For pre incorporation expenses, you debit the P&L expense accounts (or Asset if relevant) and credit the Directors loan account.

    You can include any expenses incurred prior to incorporation as incurred on the first day of the Company.

    Record these including VAT to the expense accoutns (as you are not you registered for VAT)

    When you register for VAT you can reclaim VAT on goods purchases in the last 3 years and services in the last 6 months.
    Posted: Sep 24, 2009 By: CassioAcc Member since: Mar 17, 2008
    #4
  5. FreelanceSoftwareDeveloper

    FreelanceSoftwareDeveloper UKBF Newcomer Free Member

    Posts: 1,562 Likes: 348
    Thanks again for your assistance.

    It makes sense with the cash loan but i'm still struggling with the physical assets.

    If I credit the directors loan £115 for the asset. In future when I am in a position to withdraw the loan amount the asset itself must remain in the company.

    So effectively I am loaning the company the money to buy the asset, the asset itself then belongs and is recorded as company equipment, and when in profit I am able to withdraw my loan amount. Since i've got my personal money back I have no ownership of the asset, which is correct, it belongs to the company.

    I think just whilst typing the post i've worked it out! Is my understanding above correct?

    Thanks,

    Matt
    Posted: Sep 24, 2009 By: FreelanceSoftwareDeveloper Member since: Sep 14, 2009
    #5
  6. CassioAcc

    CassioAcc UKBF Newcomer Free Member

    Posts: 960 Likes: 237
    Correct- you can drawn down on the Directors Loan account when the company has the funds to repay you.
    Posted: Sep 24, 2009 By: CassioAcc Member since: Mar 17, 2008
    #6