Directors personal bank a/c's in a company

[len.b]

Is a director, who owns all of the shares in his company, allowed to temporarily invest surplus company funds in a personal bank account, in order to earn a higher rate of interest? Could this be treated as a loan to a director? Would it make any difference, if there was a full trail to show that the money had only been used for company purposes, ie as savings for VAT or Corporation Tax? Or is there any other way to benefit from the higher rates of interest available to personal bank accounts?

[accountant@uktaxshop]

Len,

This would unfortunately be seen as a withdrawal of funds (a loan) as you and the company are different legal entities.

If you loan more than £5000 there are tax implications, so in general you wouldn’t enter into this sort of arrangement unless you have already got a substantial amount owing to your from the company from for example the introduction of capital.

In general you need to be very careful about how you take funds out of a small ltd company to ensure you havenÂ’t made any illegal distributions.

If you need some help, the please get in touch. I have a substantial number of small ltd company clients, and therefore understand the issues involved.

Regards,

James Smith
Chartered Accountant
www.jamesesmith.co.uk
01284 764436