Tiny company - can I use my personal credit card for expenses?

[ldjames]

I am the sole director of a very small limited company. I recently got a new personal credit card that has a nice points scheme so I'm trying to run as many of my normal transactions through it as possible.

I know that it's possible to claim expenses but is there a problem if I routinely put business expenses on my personal credit card? I.e., the business bank account would exist mainly to receive money from customers and to pay myself.

If it is feasible, how should I deal with categorising these expenses in my bookkeeping software? As far as I can see, the accounts used for normal costs can't be used for expenses and vice versa.

By the way, this company is not VAT registered and probably won't ever be so VAT relief isn't an issue here.

 

[Energise Accounting]

As you are an employee of the company you could create n expense claim form and claim them back that way or set up a directors loan account for the purpose of expenses.

 

[ldjames]

Yep, I've done this before. My question is more if it's a problem to do this routinely for all costs and whether I should duplicate my cost accounts are expense accounts.

 

[Energise Accounting]

I would certainly not do it for all of your costs however, for expenses it should be ok.

 

[ldjames]

I would certainly not do it for all of your costs however, for expenses it should be ok.

Why?

 

[john1989]

In the event of an enquiry you would be giving HMRC the opportunity to poke their nose in and seek to disallow costs that could be genuine business expenses.

 

[TheCyclingProgrammer]

I would always try and keep company and personal costs separate.

If you do pay for something on the companys behalf you should keep evidence if this, like an invoice in the company name.

 

[Energise Accounting]

As others have said it would give the taxman in the event of an investigation a chance to start looking at your personal accounts.

 

[Ian J]

There are some very odd answers here.

I pay almost all of my company's expenses either through my personal bank account or personal credit card and have no concerns about HMRC as I can still produce invoices for each transaction and it's fairly obvious from looking at them whether they are business expenses or not

 

[UK Contractor Accountant]

Hope you have good p11d dispensations in place!

 

[john1989]

Ian, I think you are confusing the word odd with accurate.

I hope these accounts are not included in the accounts of the company too.

 

[TheCyclingProgrammer]

Hope you have good p11d dispensations in place!

I guess it depends if they mean company or personal business expenses. The former shouldn't need reporting (so long as there is evidence that it was on the company's behalf). It's something I've done very occasionally (eg I've had problems with the company debit card not working)

Still seems an off way of doing things though. Consistently blurring the lines between company and personal expenses sounds like a recipe for disaster to me. I don't understand why, in the event of a records check, you'd want to invite such scrutiny of your personal bank accounts or risk these costs being treated as potentially a directors loan or even a BIK.

 

[TheCyclingProgrammer]

There are some very odd answers here.

I pay almost all of my company's expenses either through my personal bank account or personal credit card and have no concerns about HMRC as I can still produce invoices for each transaction and it's fairly obvious from looking at them whether they are business expenses or not

Just to add to my above post, are you not also concerned about your bank asking why you're effectively treating your personal bank account as a business one?

Do you not find it a pain having to constantly reimburse yourself and also reconcile your business transactions in your personal account against your company books?

It's not odd at all to advise keeping personal and company expenditure separate, it's just good practice. I hope you get invoices for all your company expenses in the company name!

 

[UK Contractor Accountant]

I guess it depends if they mean company or personal business expenses. The former shouldn't need reporting (so long as there is evidence that it was on the company's behalf).

Yes they do unless you have a dispensation in place - its on HMRC agenda that this stupid rule is to be scrapped but under current legislation technically they do need reporting on P11D.

 

[TheCyclingProgrammer]

Yes they do unless you have a dispensation in place - its on HMRC agenda that this stupid rule is to be scrapped but under current legislation technically they do need reporting on P11D.

Not if you've paid for something on behalf of the company you don't - you've essentialky settled a company debt and you can effectively treat it as a loan from you to the company. It's in the HMRC expenses manual and I checked this with my accountant years ago.

Edit: here's the link (page 19):
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/314687/480-2014.pdf

Businesses are often run in such a way that employees make payments on their employer's behalf. For example an employee may buy stamps for the employer and be paid from petty cash. This transaction is outside the scope of Section 62 and Section 72: the employee has received no money of his own on which we could make such a charge.
Accordingly such reimbursements do not feature on the P11D.

But as I said, you would need to show some evidence that the payment was on the company's behalf, e.g. an invoice showing the company name or some other evidence that the supply was between the supplier and your company.

 

[UK Contractor Accountant]

How do you know whether you are settling a company debt?

If you fill up the company van with diesel and then pay with your private debit card - are you saying these do not need reporting on P11D?

 

[Nuno]

In the event of an enquiry you would be giving HMRC the opportunity to poke their nose in and seek to disallow costs that could be genuine business expenses.

As others have said it would give the taxman in the event of an investigation a chance to start looking at your personal accounts.

Do HMRC need an opportunity to "poke their nose" into your account? Or a reason to start looking at your personal accounts?
If they want to look they will look. And they'll look if there is a probable return on their time. There is no concept of probable cause and if you keep good, clean records there is no need for fearing an examination.

 

[TheCyclingProgrammer]

How do you know whether you are settling a company debt?

Is the purchase being made in the company's name or mine? If its the former and is clearly a business purchase, then its a company expense. However I would expect HMRC to examine each payment carefully which is why I wouldn't ever recommend routinely mixing up company and personal expenditure and try and pay for company expenses directly from the company bank account whenever possible.

The exceptions being anything that explicitly needs to be reported on the P11D, as shown in the HMRC Expenses and Benefits guide, but as a general rule if its a business cost being incurred personally (typically travel, subsistence and accommodation) then it needs to be reported regardless of whether the employee pays and is reimbursed or if the company pays directly.

 

[Nuno]

Double post

 

[john1989]

Nuno - if you are operating a Ltd and HMRC open an enquiry to look at the Ltd and no personal accounts are used, they cannot look at the personal bank statements of the director / shareholder. It would be outside the scope of the enquiry.

If you use a personal account as part of the running of the business, HMRC would have every right to look at the personal bank account statements.

Like I say, if you want a long, drawn out enquiry looking at your personal affairs, use your personal account. If you want to do things properly and avoid heartache, operate a business bank account.

 

[Ian J]

Do you not find it a pain having to constantly reimburse yourself and also reconcile your business transactions in your personal account against your company books?

No as I don't constantly reimburse myself, I just credit the director's loan account.

 

[Nuno]

@john
I wonder if HMRC could just open another, separate enquiry? My guess is 'yes'.

By the way, a long drawn out enquiry is not the direct result of using a personal account. There could be no enquiry, a cursory glance at the records, or a short enquiry.

The main problem is the banks getting sniffy as personal accounts are mostly free, but business accounts mostly incur charges.

 

[john1989]

Could, but the chances are very small.

For a director receiving only salary / dividends from their company, HMRC would find it hard to justify asking for personal bank statements. Should they raise an enquiry on the individual, it would be easily defended and a very short enquiry.