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Director using Ltd Company bank account for non business purchases

Hi I am now to Quickfile and so far loving it!

My problem is my son :slight_smile: and the way he uses his business account. I have told him a million times not to use his business card for personal purchases but it falls on deaf ears.

So I have a directors loan account, I have done what I thought was correct but not sure if it is correct, can somebody please help! This is what I have done.

  1. I have manual loaded up his bank account, so on the bank account I have an entry that says as an example

01/03/2019 XBOX (money out) £7.99 (Tag Me)

I have used transfer between accounts on the tag button and chose Directors Loan account.

This now shows £7.99 going out of the current account and on the Directors loan account its showing £7.99 as money going into the account, is this correct and could somebody explain this too me as I am so confused.


That sounds correct. A positive balance on the director’s loan account means the director owes money to the company, an overdrawn balance would mean the company owes money to the director. If/when he pays the money back this would be represented as a transfer the other way, from DL to current account.

I agree with Ian, you are using the DIR loan account correctly.
One point, don’t let the DIR loan account increase too much.
Money he takes out of the business should be via Payroll(PAYE) or Dividends or both.

Otherwise the unpaid loan debt he owes his company will need to be reported on the company tax return, the rules about this are complex and there can be heavy penalties.

Please advise your son that if he continues to operate in this manner there will be an extra tax charge if the directors loan account remains unpaid.

He really needs an accountant because there are a few ways to reduce the tax burden but if you leave it to late there will be no other options left.

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