Claiming expenses from limited company

[trying_to_survive]

Hi

I paid some of the business expenses from my own account for the limited company I own but still have receipts for them.

For example, few train tickets, ipad, laptop food here and there but overall not a lot...I have not exactly worked it out yet.

1. When it comes to corporation tax can I treat this as business expense (I have receipts to prove from my personal account) even though I plan not to take the money from business account. So if the turnover inc VAT and balance is 5k in the business account and expense is £200 paid from my own account, can I pay corporation tax on £3800 from the business account (not counted VAT) whilst the business account still has £5k in it?

2. Same with VAT - in this scenario the VAT payable to HMRC would be £1000 (20% of £5000) claimed from customers. Once I paid the £1000 VAT directly from the business account, and VAT refund on the business purchase would be £40 from my own account originally (20% of £200 expense) paid directly to business account.

So balance once VAT and corporation tax paid on the business account is £3280.

(£760 on corporation tax of £3800 =£3040 in company account

Plus £40 based on £1000 paid to HMRC VAT resulting £40 refund from HMRC for £200 business expense coming from my personal account, which I plan not to remove from my business account) = £3080 in company account

Plus the £200, which I didn't take out from company even though it is business expense = £3280 final company profit)

Can you please advice if there is anything wrong with how I am thinking this through? First time trying to do this and worried if I am doing something wrong

Thank you.

 

[Mr D]

The £5k - you were paid £6k and the £1k is the VAT?
Turnover of £5k.

 

[trying_to_survive]

Sorry wasn't clear. £4000 for the main work + £1000 VAT = totalling £5000

 

[Scalloway]

Do you use accounting software to keep your business records? Even listing everything in a simple spreadsheet would let you make better sense of the business's transactions. VT Cashhbook is free and is asimple package.

https://www.vtsoftware.co.uk/cashbook/

 

[SteveHa]

Sorry wasn't clear. £4000 for the main work + £1000 VAT = totalling £5000

That's not right. VAT on £4,000 would be £800, so total £4,800. If you were paid £5,000 VAT inclusive then the VAT element is £833.33.

 

[Mr D]

Sorry wasn't clear. £4000 for the main work + £1000 VAT = totalling £5000

That would be VAT rate of 25%.
Which we don't have.

 

[WorkingFromHome35]

Yes, you can claim expenses. Make sure that you keep the receipts so the company has a record of the legitimate expense. Post them to your expense accounts like you would any other expense, so the VAT portion of each receipt is also netted off against what you owe - then instead of posting the other side to your bank account create a creditor to you. You can either choose to use the businesses cash to pay yourself and clear this creditor or you can net it off against your dividend account.

VAT on sales. The amount you invoice is 100% of your revenue to which you add the VAT on top. Let's assume VAT is 20% on your £5,000 invoice. The £5k is 100% of your sales and then 20% more of this for the VAT ie the invoice value is 120%; VAT = (5000/120)x20 = £833.33
It is a common assumption that VAT is 20% of an invoice, this is not correct.

 

[trying_to_survive]

Thanks a lot all.

So that I am clear what exactly am I paying to HMRC VAT?

Here is one of my invoice details

- Sales - £2,637.14 (customer, who is the agent, already paid)
- Seperate Tax invoice due to be paid late December but calculated by their online system - £527.43

I assume this is calculated by (20/100)*(2637.14) = £527.43

There are also other invoices like this but this gives an idea.

I thought this is the amount - £527.43 - that I have to pay HMRC VAT. Is this not correct?

Based on what is explained here - It sounds like I only have to pay (2637.14/120)*20 = £439.53.
This means I would have an extra £87.90 (527.43-439.53) from the VAT amount collected from my customer/agent - will be anyway when I get paid the £527.43 in December.

Sorry if I am missing something here.

 

[Scalloway]

VAT inclusive £2,637.14 X 1/6 = £394.52

VAT added £2,637.14 X 20% = £473.43

Where does £527.43 come into it?

 

[trying_to_survive]

Hi,

The sales amount £2637.14 is not VAT inclusive - that was the actual sales - calculated by number of hours worked and I wasn't VAT registered when this invoice was raised.

Following VAT registration, I had to raise a seperate invoice through the agent portal, which calculated 20% of £2637.14 = £527.43 for backdated payment.

So the question is do I pay £527.43 to HMRC or £439.53 ((2637.14/120)*20).

Thank you.

 

[Scalloway]

When I checked my calculations I see I transposed two figures. The VAT you are due to pay to HMRC is indeed £527.43.

 

[trying_to_survive]

Thank you again. For a minute I did get excited about extra money in my account. So all money I claim I have to pay HMRC. I now need to work out what my expenses are for that month money to claim VAT on back from HMRC

 

[Mr D]

I assume this is calculated by (20/100)*(2637.14) = £527.43

No idea why you are using that sum.

Your amount x 20% to get VAT.
So if you want £100 you times that by 20% to find the VAT amount to charge. So total paid by customer would be £120 of which £100 is yours and £20 belongs to HMRC that you have collected for them as an unpaid tax collector.

 

[trying_to_survive]

Ok thanks - I think we are using the same calculation - My amount of sales £2637.14 times HMRC 20% = £527.43. I still don't understand the point of VAT and why it is even there - its causing headache to me.

 

[Mr D]

Ok thanks - I think we are using the same calculation - My amount of sales £2637.14 times HMRC 20% = £527.43. I still don't understand the point of VAT and why it is even there - its causing headache to me.

Its there for government to get tens of billions in extra tax off people.
Some businesses avoid collecting it by keeping their turnover below the required registration level. Which limits their profits possible and impacts their growth.

If your sales are £2637.14 - that is exclusive of VAT?

So charging the customer £3164.57?

 

[trying_to_survive]

Hi Mr. D, Yes you are correct - charging agent who in turn probably charging client.

 

[SteveHa]

Actually, it's there because the EU said it has to be.