Question: 

“I am a business consultant and I have recently opened a limited company which I am due to start trading through shortly. I have opened a business bank account but would like to put in some start up cash (about £5k) into the account to fund the first couple of months cashflow as although I have some contracted work, the invoices will not be paid for 30 days from submission. Are there any issues in me doing this and are there any tax implications?”

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Answer:

There is no problem with you doing this. Money you introduce into the company will be accounted for as a “Directors Loan” (which will sit on the Balance Sheet i.e. it won’t be a Profit and Loss item) which can be repaid as and when with no tax implications. The only time there are potential corporation tax issues around a Directors Loan balance is if it is in debit i.e. where you owe money back to the company – see our recent post here.

Items which could put your Directors Loan further into credit are:

  • Business expenses you have paid for personally
  • Use of Home as Office claim
  • Salaries if you are not taking them out as cash
  • Dividends if you are not taking them out as cash

Items which would be Debits to your Directors Loan account include:

  • Repayment of Directors Loan balances
  • Personal expenses paid for by the business bank account
  • Further money borrowed from the company

Remember you will also need to put money into the company to pay for your subscribed “Share Capital” – this is probably something like £1 or £10 or £100 depending on how you set your company up – you’ll need to refer to the initial Companies House documents to confirm this.