SEPTEMBER 2023 AFTERMARKET 13 www.aftermarketonline.net d Protecting As an independent trade body, VLS is here to protect you by verifying that lubricant products really can deliver what they claim. That means you can have confidence that the engine oils you use in your customers’ vehicles are fit for purpose. If you have any concerns about a lubricant product, report them to us on 01442 875922 or d i @ kl l k www.ukla-vls.org.uk workshop you and your admin@ukla-v vls orguk Overdrawn directors’ loan account The third mantrap outlined by Helen follows from failing to keep company and personal expenditure separate as it can lead to an overdrawn directors’ loan account - “if this is not spotted early there will be interest and penalties to pay.” In overview, if a director has put money or assets into the company then the company owes the director. The problem arises, as Helen tells, where a director draws more money out than the company owes them, which is effectively treated as a loan to the director: “If this loan is not repaid within nine months of the company’s year end, the company must pay what is effectively a penalty charge of 32.5% of the amount overdrawn at the year end to HMRC.” The net effect is that either the director will need to transfer money (or assets) back to the company or vote themselves more dividends or salary – which will have a personal tax consequence – to give them the funds to repay the loan. If a director is overdrawn by more than £10,000 at any time during the year, they must also pay interest to the company at a minimum rate set by HMRC or be assessed on a benefit in kind. Informing customers and suppliers Another area where Helen sees directors make mistakes is over the failure to inform customers and suppliers of the business that it has incorporated and that they are now dealing with a different legal entity. As a result, she advises that “all websites, email signatures, letterheads, stationery, invoices, order book etc. need to be updated to show the company’s name, where it was registered, the registered number, and the address of the registered office.” There are fines for both the company and directors for noncompliance. Statutory duties The last of Helen’s five trouble spots revolves around company directors not fulfilling their legally-set responsibilities to the company. She says that these include acting to promote the success of the business, exercising reasonable skill and care, as well as avoiding or managing conflicts of interest between what is for the benefit of the company and what would benefit the director personally: “Failure to do this can result in serious legal consequences for the director who might be held liable personally for any failures to uphold their duties.” Next month: Advice from Kieron Batham-Tomkins.
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