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Q. My company does not have a credit card and therefore I use my own personal credit card to pay for some expenses - particularly purchases made online as a credit card gives an extra layer of protection. I also use the card for some personal expenses. Every month I pay the full balance owing on the statement for the previous month from the business bank account. How is this to be treated in the accounts?
A. In effect you are overdrawing your director's loan account for the personal expenses and repaying it later. HMRC will consider this as a beneficial loan taxable under the benefit-in-kind rules. However, there is a threshold of £10,000 below which the official rate of interest benefit-in-kind charge is not applied. Additionally, where a director or employee receives an advance for expenses necessarily incurred in the performance of their duties, the advance is not treated as a loan, provided that:
a) the maximum amount advanced at any one time does not exceed £1,000;
b) the advances are spent within six months and
c) the director or employee accounts to the company at regular intervals for the expenditure
Therefore, so long as the above conditions are adhered to, there will be no problem during the year. At the end of the year, you should calculate the amount paid in relation to personal expenses and make good on that amount - this is usually done via a dividend, or you could make reparation from personal resources.
Further help
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