How illegal is...

[Stu]

Originally Posted by malks

it is his company after all, these are the benefits of being at the top of the tree, he doesnt have anyone to answer to!

As a Director? no it is not his company at all!

It is the Shareholders' company (He may also be a shareholder - but unless he is the 100% shareholder if he's using company expenses for private assets, it's theft)

Originally Posted by PoRk ChOp

He could be taking the money as a 'Directors loan' which he is entitled to do

Director's loans are a bit of a dodgy area. There are rules regarding and when it is a loan or when it is income (eg regularity of withdrawls and whether there is a credit or debit balance).

As such, its not really that easy to say, I'll borrow 500k from my company to build a few houses and pay it back when they sell.

Also, this area I'm so so certain on, but loans to employees are a taxable benefit. Eg. If you work for a bank and get a very cheap interest rate loan, then you pay tax on that benefit (at what rate I'm not sure).

This holds true also for directors, but it is much more confusing than that.

It is to avoid directors taking drawings and claiming its just aloan and so not paying tax.

Taken from HMRC;

"If you’re a company director or ‘participator’ and take money out of your company that's not a salary or a dividend - over and above any money you’ve put in - you’re classed as having received the benefit of a director’s loan.
If your director’s loan account is overdrawn, your company must pay tax on any amount you’ve not repaid by nine months after the end of your Corporation Tax accounting period"

In reality what he's probably doing is,
He bought the land privately,
Getting his company to do the work, above board, for him, they invoice him an inflated amount.
He sells them for x amount, minus inflated amount, he pays tax on profit.
Company, pays tax on income they earn from doing the work for him.
Tax mans happy, he's happy.
He will no doubt hide a few material receipts in there also.
Or roughly what i said anyway.

Originally Posted by specialone

In reality what he's probably doing is,
He bought the land privately,
Getting his company to do the work, above board, for him, they invoice him an inflated amount.
He sells them for x amount, minus inflated amount, he pays tax on profit.
Company, pays tax on income they earn from doing the work for him.
Tax mans happy, he's happy.
He will no doubt hide a few material receipts in there also.
Or roughly what i said anyway.

Sounds about right.

Several ways you can do it, but something like that.

Originally Posted by Stu

As a Director? no it is not his company at all!

It is the Shareholders' company (He may also be a shareholder - but unless he is the 100% shareholder if he's using company expenses for private assets, it's theft)

Who said there are shareholders? I cant see that post.

Originally Posted by TazDaz

Who said there are shareholders? I cant see that post.

And even if there are, shareholders don't always have an interest in how a company is wrong, so long as there is a return on their investment.

Some shareholders want to know every decision, obviously it comes down to how much money you have invested and what you stand to lose.

He could be doing the houses to make money for the company. If this is the case, the shareholders may know about it (if there are any)

If he personally purchased the land, he can sell the land to the company for more (if he purchased it cheaply) or he can charge rent to the company on the land he is lending them.

Many ways around things.

Originally Posted by TazDaz

Who said there are shareholders? I cant see that post.

It's implied by him being referred to as a Director, as opposed to owner. To me it suggests a limited-liability company, which is a legal entity in its own right.

"A limited company in the United Kingdom or Republic of Ireland is a corporation with shareholders whose liability is limited by shares (Ltd), which is the most common form of privately held company. Setting up as a limited company is an attractive option for many people as, unlike sole traders, personal assets are completely distinct from company finances.[1]"

http://en.wikipedia.org/wiki/Limited_company

Originally Posted by carternd

It's implied by him being referred to as a Director, as opposed to owner. To me it suggests a limited-liability company, which is a legal entity in its own right.

"A limited company in the United Kingdom or Republic of Ireland is a corporation with shareholders whose liability is limited by shares (Ltd), which is the most common form of privately held company. Setting up as a limited company is an attractive option for many people as, unlike sole traders, personal assets are completely distinct from company finances.[1]"

http://en.wikipedia.org/wiki/Limited_company

Except it doesn't mean there has to be lots of shareholders, you can have one shareholder who is also the director.

Originally Posted by carternd

It's implied by him being referred to as a Director, as opposed to owner. To me it suggests a limited-liability company, which is a legal entity in its own right.

"A limited company in the United Kingdom or Republic of Ireland is a corporation with shareholders whose liability is limited by shares (Ltd), which is the most common form of privately held company. Setting up as a limited company is an attractive option for many people as, unlike sole traders, personal assets are completely distinct from company finances.[1]"

http://en.wikipedia.org/wiki/Limited_company

Not always the case though. Plenty of the topdogs in LLPs have branded themselves as Directors, rather than Partners.