Directors Loan and Company Payments

Question asked by Keith 8 years ago

Hello,

Still getting used to the functionality of CB, so there may be a simple solution to this but I can't see it.

We have two directors within the company who utilise DLAs. Either to lend the company money due to slow paying creditors or to borrow for a short term personal loan.

We are a VAT registered construction company and so buying tools materials etc is very common place. We have been told by our accountant that if one of the directors wishes to buy something personally but work related, it is above board for the company to buy it, loose the VAT and then have the sum deducted from the appropriate DLA.

Hope that makes sense. Now my question is; When a bank account statement is added, it obviously will have these purchases on it. They are then "explained" as a payment to a supplier, say Jewsons for example. This sum also needs to be put against the DLA but this then creates a second debit from the company account. I suppose I could delete the transaction from the bank statement but if we're loosing the vat then things wouldn't add up.

Any help, tips, insight would be appreciated.

Oh, and let me know if the above doesn't make sense..... I confused MYSELF halfway through writing it.

DirectorsLoan
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5 Replies

Hi Keith

Yes that's absolutely fine, it all gets accounted for through the DLA.

However, you wouldn't be able to 'lose' the VAT as it's a personal expense. You can only reclaim the VAT paid on goods and services purchased for use in your business. If something is part business part personal you would restrict the claim to the business % only but in your example I can't see how paving slabs could be seen to have dual purpose.

Best answer
8 years ago

Hi Keith

If the payment has gone through the company bank account [the Jewsons payment in your example] then it's been paid for by the company and therefore has nothing to do with the DLA.

Is that what you're suggesting? If so, I think perhaps you're getting confused.

The only time it would go through the DLA is if you originally purchased it yourself - the outgoing payment would come from the DLA bank account and not the business bank account. If then at a later date the company refunded the director it would simply be classed as a bank transfer from the business account to the DLA.

Hope that sort of clears things up.

8 years ago

Hi Kevin,

To clarify; the company owes the director money. If the company then buys something for the directors own personal use (which he could simply pay the company back for) that can be written off against the debt the company has with the director. As an example:

Director lends the company £2000. The company then buys something from Jewsons for £200 which is say... paving slabs for the directors home. The company then writes off £200 worth of debt. (although it would only be £166.67 because the VAT isn't charged to the director)

At the moment I keep track of this on a spreadsheet, but I would like to use a programme like CB to incorporate everything so that our accountant and bookkeeper can log in rather than me having to send everything as PDF's all the time.

8 years ago

Hi Keith

Yes that's absolutely fine, it all gets accounted for through the DLA.

However, you wouldn't be able to 'lose' the VAT as it's a personal expense. You can only reclaim the VAT paid on goods and services purchased for use in your business. If something is part business part personal you would restrict the claim to the business % only but in your example I can't see how paving slabs could be seen to have dual purpose.

Best answer
8 years ago

Ok, so assuming I can't lose the vat, how would you record this? just delete the line in the bank statement?

I'll have to speak to our accountant to see if he agrees with you on the VAT. I can't remember if I asked our bookkeeper or our accountant. hmmmm.

Thanks for your help again Kevin.

8 years ago

Let's just say if he doesn't he agree with me on the VAT he's wrong ;-)

Re the transaction itself, no you don't delete it. When you see it coming out of the bank account in Clear Books you'd class it as a transfer over to the DLA bank account.

8 years ago

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