Can Directors use company Cash for their own benefit

A limited company consider as having its own legal status, which means it is liable for any liabilities it incurs and is the legal owner of all its assets.

Who owns a limited company?

Limited companies owned by one or more individuals (human or corporate) known as ‘members’. The members of a company ‘limited by shares’ call shareholders.

Who runs the day-to-day affairs of a company?

A company’s day-to-day management delegated to its directors by its shareholders. The shareholders appoint the directors, who can then appoint additional directors.

Can directors use the business money?

The directors of a company cannot use company assets – including the money in the bank – as if they belonged to the director personally in real terms. Any money extracted from the business must pay out via salary or dividend as authorized channels.

Are there any tax ramifications for directors’ withdrawals?

Any amounts withdrawn otherwise should record and disclosed in annual accounts, as well as reported to HMRC under Loans to Directors. If a director takes a loan from their company, the company will not have to pay any additional tax on it if the loan is paid back within 9 months of the end of the company’s tax year, for any amounts withdrawn for over 9 months, an additional 32.5% Corporation Tax is levied on the outstanding loan amount at the end of the financial year.

What obligations and duties should a director bear in mind?

The directors are accountable for keeping accurate and fair records for the company. Tue and fair both mean and include:

•comply with any relevant legislation or regulatory requirements.

•provide an unbiased (fair and reasonable) presentation.

•faithfully represent the underlying commercial activity (the concept of ‘substance over legal form’).

A Recent court case decision:

These obligations were not met, as illustrated by a recent instance in which a director was barred from being a director for 11 years after wrongly accounting for about £2.3 million over a six-year period. The director misappropriated over £2.3m from company funds, resulting in HMRC losing nearly £1m in tax.

Moreover, the company ceased trading in February 2021 and went into liquidation shortly after. Following its liquidation, the Insolvency Service launched an inquiry, which revealed massive tax evasion. Investigators discovered that the business owed £940K in unpaid tax as a result of the director’s activities at the time of insolvency.

Next Step:

If you are looking to know more about directors’ responsibilities, please feel free to Book a free consultation now.

 

Tax disclosure: Who to contact if you let out residential property

If you are a UK residential landlord, it is critical that you understand what taxes you may require to pay and which Tax disclosures are required rental for property.

Individuals who earn rent or income from land and property require to file a tax return. So, you would need to file a tax return to let HMRC know that you are getting money from renting out a property

Regardless of whether you make a profit or a loss from the property, you must report it to HMRC. But you only have to pay taxes on your net rental profits, which are your rental income minus the expenses (deductions) that you can claim. So, if you make no money, you won’t have to pay any taxes.

The first £1,000 of your income from property rental is tax-free. This is your ‘property allowance’.

You must report it on a Self-Assessment tax return if it’s:

  • £2,500 to £9,999 after allowable expenses
  • £10,000 or more before allowable expenses

HMRC’s View on disclosure:

HMRC takes rental income disclosure extremely seriously. Currently, HMRC is running a campaign in which you may bring your tax affairs up to date if you’re an individual landlord letting out residential property in the UK or overseas and secure the best available conditions to pay the tax you owe.

In a case that occurred not too long ago, a person was sentenced to jail time for failing to disclose rental property. The order declaring the person in question bankrupt came down from the County Court in Warwick in August of 2017. The Official Receiver was the first trustee to appoint, preceding the appointments of any other trustees.

What’s new is coming:

The government is already extending the requirement to use Making Tax Digital (MTD) to taxpayers with more than £10,000 in business and/or property income, including landlords, sole traders, and partnerships, for their Income Tax duties.

The government recognises the difficulties that many UK businesses have endured as the country has emerged from the pandemic over the last year. Because of this and the feedback from stakeholders, we will now start using MTD ITSA in April 2026 instead of April 2023.

Next Step:

If you are looking to know more please feel free to Book a free consultation now.

 

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