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Ben Jones
Ben Jones, UK Lawyer
Category: Law
Satisfied Customers: 44874
Experience:  Qualified Solicitor - Please start your question with 'For Ben Jones'
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dear sir..an ex company director is wishing to place a claim

Customer Question

dear sir..an ex company director is wishing to place a claim against me as he believes that he is owed money from my company..during his time with my company as a partner, he supported me on the day to day cost of a start up company i.e pens/paper/website(that was paid out of his own personal account).. it is my understanding this comes under the banner of operating costs..

correct me if i wrong but he has mistaken this as an investment that feels is owed back to him..i did have a written agreement stating any investment that he introduces will be refunded if in the future he decides to leave..

So my question ...can use the operating cost budget as any investment that he made and hence make a claim?..thank you
Submitted: 2 years ago.
Category: Law
Expert:  Ben Jones replied 2 years ago.

Ben Jones :

Hello, my name is Ben and it is my pleasure to assist you with your question today.

Ben Jones :

Did the agreement define what these capital investments could include?

Customer :

Hello Ben...the agreement did not define what the capital investment would be

Ben Jones :

How much is he after?

Customer :

£16,000.00

Ben Jones :

ok let me get my response ready please

Customer :

ok..

Customer :

Hi Ben..are you likely to assist today please...Thanks

Ben Jones :

Hello can you please let me know if you can see this reply, I am having some issues accessing chat again?

Customer :

hello..yes i can..

Ben Jones :

I am having some issues with chat so will have to end this but can you please exit the page and close it down then come back in after a minute or so to the same page (ave the link if you want), and I will change formats in the meantime to fix this. Many thanks

Expert:  Ben Jones replied 2 years ago.
Hi I ended chat as mentioned, please let me know if you can see this page and the history of our exchanges above, thanks
Expert:  Ben Jones replied 2 years ago.
Hopefully you will this response at some point:

As you have correctly identified, there are operating costs as well as capital investments. The latter refers to money that has been placed in the business and used to purchase fixed assets, for example land, equipment, vehicles, machinery, etc. Alternatively it could be used to enhance existing assets. Generally, it must yield a long-term benefit to the company. It does not include the day to day running of the business and its associated expenses, like stationery, minor equipment purchase, cleaning or painting of premises, etc.

When it comes to the development of a website, then it can be argued that if this was a long term project that has created an enduring asset, it can be seen as capital expenditure and fall within the agreement you entered into.

So as there is no specific list of the type of expenses and what they fall under, it is really a matter of establishing which can meet the definition of capital expenses and of operating costs. Remember that to be capital, something has to be an enduring investment into the company rather than something required for the day to day operation of the business.

As a guide you may refer to this booklet - it does deal with taxes and the treatment of expenditure for these purposes but it is nevertheless a useful guide when checking how they define different types of expenses:

http://www.hmrc.gov.uk/agents/toolkits/capital-v-revenue.pdf

Page 8 onwards is relevant, particularly the heading 'Risk' under each question as that explains the thinking of whether an expense is capital or expenditure.

Whilst you cannot stop the person taking formal action if they wanted to, a common sense approach to resolve this would be recommended, for example highlighting the specific expenses he has paid for and providing an explanation as to why they are an expense rather than capital. If it comes to end it may be down to a court to decide that but hopefully it is something that can be resolved via direct discussions with the other party.

I hope this has answered your query. Please take a second to leave a positive rating, or if you need me to clarify anything before you go - please get back to me and I will assist further as best as I can. Thank you and feel free to bookmark my profile for future help:


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