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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4984
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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During the last 2 years I have had to pay a penalty at the

Customer Question

During the last 2 years I have had to pay a penalty at the bank of £3000 a month, the bank has now said this is a error and gave me the money back.
I am a sole trader
To pay for this £3000 I increased the rent of another business I have a interest in, Ltd Company, it seems to me as i increased the rent due to the property costs of the ltd company i should refund the increased rent to the limited company . The increased rent can be proven in the ltd company accounts.
My reasons for this are if i leave the money where it is the tax charge will be personal, where as if I refund the rents I probably will be able to declare a dividend or at worst pay corporation tax only. My existing accountants are been vague on this.
Submitted: 1 year ago.
Category: Tax
Expert: replied 1 year ago.
Thank you for your question..Just to clarify matters -The penalty you paid to the bank ... was it expensed in your accounts as a sole trader or LTD company and you claimed tax relief on it? Many thanks
Customer: replied 1 year ago.
it was expensed in the sole trader and tax relief was claimed, and expensed as rent out in the limited company . SO basically the limited company had to increase its property rent to pay the sole trader which paid the bank as the sole trader could not afford it. The HMRC have made it quite clear it has to go in the current year profit and loss sheet and we can not amend previous accounts. Thats why I am thinking do i refund the increased rent to limited company it will be about £80000 as it went on for 3 years plus and let the ltd company handle the tax
Expert: replied 1 year ago.
Thank you for your prompt reply.The LTD company paid you increased rent to compensate for this expense.You declared both the income and expense in your sole trader accounts.Now that the bank has compensated you for the loss, it becomes an income.The question is in whose books we show this as an income.I would show it in sole trader and also make a payment to LTD company of the same amount so your sole trader accounts show nil effect.The income would ultimately be declared in the books of the LTD company and let them pay tax at 20%.I hope this is helpful and answers your question.If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.
Expert: replied 1 year ago.
Hi there
Just checking in. How did things turn out?
Many thanks