Jennifer Adams considers the tax position should a company pay a director's personal expenses.
Directors of small companies, especially those with prior experience of self-employment, often overlook the distinction between company funds and personal finances.
It can be hard for some directors to resist the temptation to channel all expenses through the business bank account, whether those expenses are company-related and tax-deductible or personal. However, such a practice has tax implications.
To obtain a tax deduction for an expense incurred by a director (or any employee), three conditions must be met:
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The director-employee must be obliged to incur the expense.
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The expense must have been incurred in the performance of the employment duties.
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It must have been incurred ‘wholly,
