Business expenses can be claimed against tax, but personal expenditure cannot.
It is therefore necessary to distinguish between the two.
Many businesses on starting up will continue to use a “personal” bank account for their business transactions. However, it will be far easier to administer if a business account is opened up at the outset.
Many may then still pay private bills from their business account. This adds to the workload in preparing business accounts in having to identify which is business and which is private and means many more transactions need to be processed than necessary. Yes, funds will be needed to be taken to meet personal expenditure from the business – and the best way is to transfer a lump sum from the business account to the private account and spend money from the private account. Depending on the business setup, this will be either “drawings” or a “directors loan account repayment”. Care is needed with regard to directors loan repayments – but this is not explored further here.
What really takes inordinate amounts of time to sort are items such as garage bills – pay for petrol, and perhaps a newspaper, sweets or even cigarettes on the same transaction – and worse still claim VAT back on the whole of the spend. Whilst it may appear to be a “hassle” at the time, please pay for business and private items as two separate transactions and on separate cards!
If you need any help or would like to discuss in more detail, then please call now.
