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Ask Ash Your Own Question

Ash
Ash, Solicitor
Category: Law
Satisfied Customers: 10915
Experience:  Solicitor with 5+ years experience
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I have a small limited company. I have been in business for

Customer Question

I have a small limited company. I have been in business for 14 months. I have not registered for PAYE as our takings were not sufficient. I am registered for VAT to pay suppliers and claim VAT back. I have only just found out that I have to have a separate business account. I have been running the business through my personal accounts, and while everything has been above board, I realise I do not have a transparent audit trail. Am I in serious trouble - what should I do - apart from opening a business account immediately.
Submitted: 3 years ago.
Category: Law
Expert:  Ash replied 3 years ago.

Alex Watts :

Hello my name is Alex and I will help you with this. Please note that I am a working Solicitor and may be on and offline as I have to attend Court and meet with clients, even at weekends. As such you may not get an instant response when you reply as this is not an ‘on demand’ live service, but rest assured I will be giving your question my immediate attention upon return. There is no need to wait here, you will get an email when I reply.

Alex Watts :

Have you filed any accounts? Did you have separate account or did you just use your day to day ones please?

JACUSTOMER-mp6771g6- :

I have not yet filed any annual accounts. I use the services of a bookeeper, who advised me that I do nto have to do that yet. But it annual accounts will be due soon.

Alex Watts :

Why did you not open a business account?

JACUSTOMER-mp6771g6- :

Because I did not know that I needed to

Alex Watts :

And did you have a separate personal account or your normal daily one?

JACUSTOMER-mp6771g6- :

I have my normal daily one, only

JACUSTOMER-mp6771g6- :

all personal and business transactions have been going throih the same account

Alex Watts :

In terms of income, do you get paid by cheques? Did you issue invoices?

JACUSTOMER-mp6771g6- :

I issue invoices, with VAT reg Number etc. I receive payments from invoices to my current account (personal details not company details

Alex Watts :

So you have income which you can account for?

JACUSTOMER-mp6771g6- :

I have an income, but it is small. It is not sufficient to warrant PAYE registration. I do not have a regular income. I take money as director draw downs

Alex Watts :

But in terms of COMPANY income you can account for all receipts because you have invoices etc?

JACUSTOMER-mp6771g6- :

yes

JACUSTOMER-mp6771g6- :

every penny

Alex Watts :

And expenses I assume you have invoices for those?

JACUSTOMER-mp6771g6- :

and also I can account for all debts

JACUSTOMER-mp6771g6- :

and expenditures

Alex Watts :

Ok. Then it is not all bad.

JACUSTOMER-mp6771g6- :

I have a record of expenses incurred

Alex Watts :

Your accountant fees will be quite high because he will have to work through the mess.

Alex Watts :

But you appear to have a record of income which can be tried up with invoice receipts and income into the bank

JACUSTOMER-mp6771g6- :

my concern is that I am not able t provide transparent audit trail which cna be reconciled against a separate bank account

Alex Watts :

You have a record of outgoing expenses so it will just be the case of separating those out.

Alex Watts :

That will be an opinion in terms of accounts from your accountant - there is nothing you can do about this now.

JACUSTOMER-mp6771g6- :

may I illustrate my concenr with an example?

Alex Watts :

You may have also committed an offence under the Companies Act for not properly accounting for income/expenses with a business bank account

Alex Watts :

Please do

JACUSTOMER-mp6771g6- :

say I have drawn down £3500 as a part payment against a loan I made to the company

JACUSTOMER-mp6771g6- :

I have a record of that in my cash book and spreadsheets

Alex Watts :

ok

JACUSTOMER-mp6771g6- :

but if I was asked to show the transaction in my bank account

Alex Watts :

Yes

JACUSTOMER-mp6771g6- :

I would say it i 3500 of that 5000 transfer I made from saving to current account

JACUSTOMER-mp6771g6- :

(hardly transparent)

JACUSTOMER-mp6771g6- :

but the figures add up

Alex Watts :

Then you may have to pay tax on the total income less expenses but anything that could normally be written off you will probably have to take a hit on.

Alex Watts :

This is why your accountant may have a hard time and that bill may be quite high

JACUSTOMER-mp6771g6- :

have I broken the law?

Alex Watts :

But as long as you can account for general income and expenses that just may mean you pay more tax than you would normally because you can not allow for deductions.

Alex Watts :

Yes you have.

JACUSTOMER-mp6771g6- :

I am a very upright sort of chap

JACUSTOMER-mp6771g6- :

oh deat

Alex Watts :

You should be able to properly account for income/expenses and have individual accounts.

Alex Watts :

It may be something your accountant can sort out but he will take far longer than normal.

JACUSTOMER-mp6771g6- :

okay

Alex Watts :

Can I clarify anything for you about this today please?

JACUSTOMER-mp6771g6- :

sorry, I dont understand?

Alex Watts :

Can I clarify anything for you about what we have discussed please?

JACUSTOMER-mp6771g6- :

I will open an account tomorrow

Alex Watts :

ok

JACUSTOMER-mp6771g6- :

a separate business account

Alex Watts :

yes

JACUSTOMER-mp6771g6- :

and ask my accountant to reconcile as best we can

Alex Watts :

Yes.

Alex Watts :

That will be key

JACUSTOMER-mp6771g6- :

what esles shoudl I do to mitigate my liability?

Alex Watts :

And just expect to take a hit on tax

Alex Watts :

That is all you can do

JACUSTOMER-mp6771g6- :

oh dear

JACUSTOMER-mp6771g6- :

thank you for your help

Alex Watts :

Let your accountant try and sort it and take a hit on tax for that accounting year

JACUSTOMER-mp6771g6- :

I dont mind a hit on the tax

Alex Watts :

If this answers your question could I invite you leave feedback on my service which I hope has been excellent today, if you need more information or help then please click reply.

Please remember that I am always happy to help if you have future questions, even if I am in Court I can normally respond within a few hours. For future information, please start them with ‘For Alex W’.

Please bookmark my profile if you wish for future help: http://www.justanswer.co.uk/law/expert-alexwatts/

JACUSTOMER-mp6771g6- :

I dont want a crimianl record

Alex Watts :

Yes

JACUSTOMER-mp6771g6- :

or worse

Alex Watts :

Of course.

Alex Watts :

If this answers your question could I invite you leave feedback on my service which I hope has been excellent today, if you need more information or help then please click reply.

Please bookmark my profile if you wish for future help: http://www.justanswer.co.uk/law/expert-alexwatts/

JACUSTOMER-mp6771g6- :

thank you, bye

JACUSTOMER-mp6771g6- :

I wil close this now

Alex Watts :

Thank you.

Alex Watts :

Please do take a moment to leave feedback today.

Alex Watts :

Can I help further?

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