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I've formed a new limited company of which I am the director and sole shareholder. My understanding is that when I make business expenses, I should now ask the supplier to make out the invoice to the limited company rather than to me personally.

Let's say that I make a business expense on behalf of the company, and when I receive the invoice from the supplier, the invoice appears to be made out to me (i.e., it has my name at the top, though it does also contain the name and address of my company underneath), and for whatever reason the supplier is unable or unwilling to issue a new invoice with my name removed.

  • Can this invoice be paid out of the company's business account? Or is the right approach to pay this invoice out of a personal account, and then reimburse myself out of the company's business account?
    • If I need to pay it out of a personal account and reimburse myself, is there some documentation that it would be useful for me to create and keep with the company records for tax/compliance purposes? Is it sufficient to just create an expense reimbursement form with the date, amount, and nature of the expense?
    • Also, would I then be taxed on this reimbursement as if it were self-employment income, even though it was a business expense?
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  • What's the relevant jurisdiction? You've tagged LLC, which is American, but another post of your refers to the UK.
    – user35069
    Commented Dec 14, 2022 at 10:26
  • This is a limited company in the UK (where I live and work), although I'm an American citizen, so the company will also be taxed by the US as a 'controlled foreign corporation'. So the rules of both countries are relevant. I assume that the specific issue I asked about in the question works the same way in the US and UK but I might be wrong.
    – Gabriel
    Commented Dec 14, 2022 at 11:17

1 Answer 1

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As the sole director and shareholder, the cleanest approach is to pay the invoice from the company account as if it were issued to the company's name. This way, you don't need to keep records (such as a director's loan account) to explain why the company is claiming a deduction for expenses paid from your personal account, and you are not paying income tax on the reimbursement.

The problem with this approach, and the reason why larger companies don't use it, is that you now need to be able to prove that the invoice relates to a legitimate business expense. For a one-person company, that will usually be pretty obvious from the nature of the expenses and if not, you'll remember what happened, but this does not scale up for businesses with employees claiming reimbursement.

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    If it is a small invoice and you are worried about legality and not the money you can pay the invoice (personally) and then sell the item to the company. You have a problem with VAT. If the bill is £10 + 20% VAT then you personally can’t handle VAT, so you charge the company £12 with zero VAT. So the company can’t deduct the VAT of £2. For £2, no problem. If it is a £10,000 bill you will lose significant money.
    – gnasher729
    Commented Dec 14, 2022 at 21:50

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