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Where Taxpayers and Advisers Meet

Credit Card

Comm1
Posts:2
Joined:Mon Sep 30, 2024 8:18 pm
Credit Card

Postby Comm1 » Mon Sep 30, 2024 8:25 pm

I have been using a personal credit card to make purchases for my business. I'm a sole trader. Someone has told me these credit card purchases will be treated as money into my business and therefore taxable .Is this correct? Thankyou in advance.

Lambs
Posts:1618
Joined:Wed Aug 06, 2008 3:15 pm

Re: Credit Card

Postby Lambs » Tue Oct 01, 2024 6:15 am

C,

You are taxable as a sole trader on that trade's profits. These in turn derive from trading income, less allowable expenses. Your purchases are not income, but expenditure.

I infer that you/your friend are concerned that, if and when these purchased items come into your business, (or perhaps when you apply personal funds to pay off your personal credit card) then this will be treated as taxable trading income to your business. No. If you are applying your own personal funds to benefit your business, then this is non-taxable "capital introduced" rather than taxable income. Similar to if someone put (say) £500 of their own money into their business' bank account, or introduced their personally-owned laptop into the business.

I trust this makes sense.

Kind regards,

Lambs

Comm1
Posts:2
Joined:Mon Sep 30, 2024 8:18 pm

Re: Credit Card

Postby Comm1 » Tue Oct 01, 2024 11:06 am

Thankyou Lambs for your reply explaining my query. Much appreciated. 👍

AGoodman
Posts:1883
Joined:Fri May 16, 2014 3:47 pm

Re: Credit Card

Postby AGoodman » Thu Oct 03, 2024 12:10 pm

As a sole trader, you are your business and your business is you. There is no distinction. There cannot be tax on you introducing or removing funds from the business.

Lambs
Posts:1618
Joined:Wed Aug 06, 2008 3:15 pm

Re: Credit Card

Postby Lambs » Thu Oct 03, 2024 6:58 pm

Hi AG,

I agree in broad terms, although I should point out that much of tax law is based on the accounting pretence that the proprietor IS separate from his/her business - hence capital introduced, capital account, Silk v Fletcher, BIM45700, etc. etc. - even "wholly and exclusively" relies on a distinction between the business and what is NOT that particular business.

Likewise that trades should be streamed separately, for losses treatment. I think that VAT is more logical in this regard.

But probably only in this regard.

Kind regards, (the other ones),

Lambs


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