Ltd with personal bank account

[Ali123]

Hi all,

I would like to know why your not allowed a personal bank account (when i say personal, its a business bank account but for a soletrader) if you are a limited company.

Why does the bank need to open another account for a LTD company?

If I invoiced clients under the soletrader bank account details, cant i just use all the details from that bank to produce the accounts?

Why does it have to be a limited bank account.

Just a bit confused about this.

Thanks in advance

Ali

 

[Robert Pearce]

A limited company is a separate legal entity so it should have it's own bank account.

If you were to try and use a bank account in your name, then any sales receipts going into it would be treated as a loan from the company to you (although any business expenses paid out of this bank account would reduce this loan). Loans from a company to its director-shareholders can have adverse tax consequences. They can lead to a benefit in kind arising on you, which would affect your personal tax situation and result in the company paying Class 1a national insurance. It can also lead to the company having to pay a corporation tax charge on the overdrawn loan balance.

 

[Ali123]

Hi Robert,

Thanks for your reply.

If for instance i get paid tomorrow X amount of money into the soletrader account and transfered this straigh to the LTD account would it still be classed as a directors loan?

(reason why this might happen, is because around 120 customers allready have the soletrader bank account details to pay in , therefore the soletrader account can expect some payments)

I will open a ltd bank account now, but just wondering, if it still would be classed as directors loan, if payments happen to go in (only for short time while i sort this out) and transfered in to the ltd company.

Thanks

Ali

 

[Robert Pearce]

The money is a loan from the company to you as long as it sits in your sole trader bank account. As soon as it's transferred to the company bank account, the loan has been repaid.

As long as the amounts sitting in the sole trader bank account don't exceed £5,000 at any time, then a benefit in kind won't arise. Even if it did exceed £5,000, the fact that the loan would only be outstanding for a few days would mean that the benefit in kind would be minimal.

Transferring funds to the limited company is a bit of a hassle so the sooner the limited company bank account is set up and customers are paying into this account, the better.

 

[Ali123]

Thanks for your advice Robert

I best open a ltd company quick.

Thanks

Ali

 

[Truemanbrown]

Another reason why the company should have its own bank account is that if HMRC decide to investigate the company's affairs, by using a private account, you are effectively going to allow HMRC access to some of your private records unnecessarily.

Not a good idea!!!