50K route funds transfer from business to personal after investment

[janred]

Hello,

I have my Tier 1 Ent. extension 50K route next week and have a question related to accounts.

I have invested £50K in 4 lots distributed throughout 2021. Investment was direct cash transfer from my personal account to business account (Director's loan). Now in Jan 2022, I transferred £2K from my business account to my personal account. Is this an issue? My accountant says that net investment is only £48K as per accounts from Jan 2021 - Jan 2022.

Thank you in advance for your advice.

[marcnath]

Hello,

I have my Tier 1 Ent. extension 50K route next week and have a question related to accounts.

I have invested £50K in 4 lots distributed throughout 2021. Investment was direct cash transfer from my personal account to business account (Director's loan). Now in Jan 2022, I transferred £2K from my business account to my personal account. Is this an issue? My accountant says that net investment is only £48K as per accounts from Jan 2021 - Jan 2022.

Thank you in advance for your advice.

It depends.

What was the 2K for?

[janred]

Thanks for the response. No specific reason was mentioned for transfer, but it is for personal expenses.

Some further details:
- Additional investment of £80K from an angel investor was recorded in Sep. 2021
- I withdrew around £8K from Feb.2022 - May 2022 from business account to personal account for personal expenses

[marcnath]

Thanks for the response. No specific reason was mentioned for transfer, but it is for personal expenses.

Some further details:
- Additional investment of £80K from an angel investor was recorded in Sep. 2021
- I withdrew around £8K from Feb.2022 - May 2022 from business account to personal account for personal expenses

So it was not drawn as salary?

Has your business been having revenue and profits ?

[janred]

It was not recorded as salary, so no PAYE etc. was setup.

We have no revenues or profit.

[marcnath]

It was not recorded as salary, so no PAYE etc. was setup.

We have no revenues or profit.

Ok. In that case, all your drawings will not count towards the investment.

So actually, your investment account should only show £40K. Not sure why your accountant has not deducted the earlier 8K

[janred]

Because he only saw accounts up to Jan. 2022 while filing accounts.

This is a nightmare for me now since I do not seem to fulfil the £50K. Can I show this £10K as salary or perhaps put this back into the business account?

[marcnath]

Because he only saw accounts up to Jan. 2022 while filing accounts.

This is a nightmare for me now since I do not seem to fulfil the £50K. Can I show this £10K as salary or perhaps put this back into the business account?

Yes, you can invest another 10K before you file for your extension.

Your accountant then needs to prepare a management accounts for the part year.

[janred]

Yes, you can invest another 10K before you file for your extension.

Your accountant then needs to prepare a management accounts for the part year.

I have already submitted the application but still have the possibility to upload documents before BRP appointment next week.

Just to be clear there is no other way than putting back £10K right? I cannot show this as salary etc.

[marcnath]

Yes, you can invest another 10K before you file for your extension.

Your accountant then needs to prepare a management accounts for the part year.

I have already submitted the application but still have the possibility to upload documents before BRP appointment next week.

Just to be clear there is no other way than putting back £10K right? I cannot show this as salary etc.

There is no other way.

Remember that it is not just about putting the £10K. Your accountant has to prepare a proper interim (management) accounts that shows the full 50K, which you need to submit.

Regards


Shankar

[janred]

After reading the guidance in detail and discussion with my accountant, I will do the following:

- Show unaudited accounts for Jan 2021 - Jan 2022, showing my full investment. That is my company accounting period anyhow. I will invest the additional £2K to round up to the £50K
- Show business bank statements for the same period above showing the investment from my name.

There is no guidance to produce recent business bank statements, so I don't think I need to complicate the situation.

Thank you for the advice, much appreciated.

[marcnath]

After reading the guidance in detail and discussion with my accountant, I will do the following:

- Show unaudited accounts for Jan 2021 - Jan 2022, showing my full investment. That is my company accounting period anyhow. I will invest the additional £2K to round up to the £50K
- Show business bank statements for the same period above showing the investment from my name.

There is no guidance to produce recent business bank statements, so I don't think I need to complicate the situation.

Thank you for the advice, much appreciated.

Yes, that would meet the documentary requirements.
My personal feeling is that you may get through given that you have had an angel investment, which is a strong indication of genuineness.
However, you still run the risk if you are picked for further review. They can ask for further documents and you will not be able to top up at that time.
Up to you to weigh the risks.