# Tax treatment of weddings by a company



## Bronte (4 Oct 2012)

If you have a company and that company pays all your bills, utilities, mortgage, weddings etc. How in particular would that go into the accounts.  And more imporantly how would it be treated for tax.  Let's take a wedding of say 1 million.  What would be the company tax benefit of paying for a wedding ? Can you claim VAT back etc.


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## mandelbrot (4 Oct 2012)

That's a really weird question Bronte!

I presume you're talking about a company whose business is nothing to do with weddings, paying for the wedding of its proprietary director?

In which case the amounts paid on behalf of the director will have to be treated as either salary/BIK or loans to director (bearing in mind the 10% limit for company law purposes), both of which have tax costs for the company and proprietary director. They could probably declare it as a dividend either, but that would probably be very tax inefficient (assuming we're talking about an Irish scenario).

And as the expenditure is not money laid out by the company in the course or furtherance of its business there would be no VAT deductibility either.

In other words, there is no tax benefit to the company of paying for the wedding (nor should there be!) - it would not be treated any differently than if the individual had taken a salary / loan / dividend out of the company to pay for the wedding.


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## Brendan Burgess (4 Oct 2012)

Hi Bronte - first of all congrats on the good news!  

There would be absolutely no benefit in paying for your wedding or anything else through a company. 

You can't claim VAT back as the expenditure was not used for business purposes.

All such expenditure should be treated as net pay and grossed up for tax purposes. 

It would be a really unwise thing to do as a Revenue audit would be extremely suspicious of it and would probe it extensively.

Don't get involved in loans either - they cause huge problems.


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## bazermc (4 Oct 2012)

Bronte said:


> If you have a company and that company pays all your bills, utilities, mortgage, weddings etc. How in particular would that go into the accounts. And more imporantly how would it be treated for tax. Let's take a wedding of say 1 million. What would be the company tax benefit of paying for a wedding ? Can you claim VAT back etc.


 
Is this a wind up or an actual serious question?

Simple answer is no you cannot claim VAt back on expenditure that is absolutely nothing to do with the company.  Even if it was related VAT is not recoverable on food entertainment hotel costs etc


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## Hans (4 Oct 2012)

I wondered about that question too over the weekend when I read that Sean Quins daughter got married lately his company paid for it even the 100K for the wedding cake (maybe I shouldn't read everything that is said in the paper) but I thought does his accountant know something I should know about as my daughter got married this summer and maybe my company could pay for it!!!


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## Bronte (4 Oct 2012)

mandelbrot said:


> That's a really weird question Bronte!
> 
> I presume you're talking about a company whose business is nothing to do with weddings, paying for the wedding of its proprietary director?


 

Not at all a weird question as Hans has pointed out.  You never know what those clever boys in Deloitte/E&Y/KPMG dream up.  

You mentioned there about a business being in the business of weddings, like a hotel business, then let's just take a wedding, would that be allowed somehow for tax purposes.  Is there any way it can have a tax benefit?


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## DB74 (4 Oct 2012)

Ah sure didn't he employ loads of people and the GAA are supporting him now so he can't be all bad


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## T McGibney (4 Oct 2012)

DB74 said:


> Ah sure didn't he employ loads of people and *the GAA are supporting him* now so he can't be all bad


Please explain?


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## Setanta12 (4 Oct 2012)

IMHO, the Quinns didn't take a wage in the usual sense - all expenses were routed through the company and at the year-end, when the P35 returns etc are done up, these expenses are taken into account.

There is absolutely nothing unusual in this at all. It happens in tens-of-thousands of companies across Ireland.

(Btw I'm not an apologist for the Quinns and abhor the recklessness with which they've conducted their (other) affairs)


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## Bronte (4 Oct 2012)

Kildavin said:


> IMHO, the Quinns didn't take a wage in the usual sense - all expenses were routed through the company and at the year-end, when the P35 returns etc are done up, these expenses are taken into account.
> 
> There is absolutely nothing unusual in this at all. It happens in tens-of-thousands of companies across Ireland.


 
How is it normal for a company to pay personal bills?  In what way are the expenses taken into account.  You mean they are repaid to the company?


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## mandelbrot (4 Oct 2012)

Bronte said:


> Not at all a weird question as Hans has pointed out. You never know what those clever boys in Deloitte/E&Y/KPMG dream up.
> 
> You mentioned there about a business being in the business of weddings, like a hotel business, then let's just take a wedding, would that be allowed somehow for tax purposes. Is there any way it can have a tax benefit?


 
Ahhhh now I get it, I hadn't heard anything about THAT wedding; I saw a thread about expensive wedding cakes somewhere else here, but that went over my head too! 

There's no direct or legitimately obtainable tax benefit, but there would certainly be scope for absorbing some of the costs of one particular wedding into the overall overheads of running the business.


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## mandelbrot (4 Oct 2012)

Bronte said:


> How is it normal for a company to pay personal bills? In what way are the expenses taken into account. You mean they are repaid to the company?


 
It's entirely normal, even more so in the smallest of companies. Remuneration can be in money or money's worth - so if you set up a DD for your ESB from out of your Ltd Co's current account, then this amount will be treated as either a loan to you from the company (but again this has its own set of issues), or more likely be treated as part of your director's salary for the year and PAYE operated accordingly.


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## T McGibney (4 Oct 2012)

Its not at all normal for a company to routinely pay personal bills, especially when the cumulative amounts involved are substantial. Most companies steer well clear of such messing, although many will have occasional, minor 'personal nature' items that can be accounted for through Directors Current ac or in lieu of net salary payments.  

Generally, the ODCE take a dim view of the use of company funds to finance personal lifestyles. If a client company is doing so, their accountant would normally be tempted to put them into the 'nightmare client' or 'ex-client' folders.


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## Bronte (4 Oct 2012)

mandelbrot said:


> There's no direct or legitimately obtainable tax benefit, but there would certainly be scope for absorbing some of the costs of one particular wedding into the overall overheads of running the business.


 
Would that be considered a gift? We're not talking normal wedding here, where the daughter of a hotel owner absorbs say the catering and drinks cost which wouldn't be a very large figure really.  But a wedding costing a million, wouldn't that be more of a gift tax wise.  

I hadn't realised it was normal for companies to pay the personal bills and then recoup/deduct etc.  That answers my question on the tax treatment.


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## T McGibney (4 Oct 2012)

Bronte said:


> I hadn't realised it was normal for companies to pay the personal bills and then recoup/deduct etc.



Its not normal. See above.


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## Bronte (4 Oct 2012)

T McGibney said:


> Its not at all normal for a company to routinely pay personal bills, especially when the cumulative amounts involved are substantial. Most companies steer well clear of such messing, although many will have occasional, minor 'personal nature' items that can be accounted for through Directors Current ac or in lieu of net salary payments.
> 
> Generally, the ODCE take a dim view of the use of company funds to finance personal lifestyles. If a client company is doing so, their accountant would normally be tempted to put them into the 'nightmare client' or 'ex-client' folders.


 
My post crossed with this. I know your'e an accountant McG, I didn't think it was normal either. Very messy. But I guess people in a certain wealth category being a nightmare client to you might be a big money spinner for the large accounting firms. I'd imagine in this scenario they have people full time working on all this. 

You mention dim view, but it's not illegal to operate this way.


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## T McGibney (4 Oct 2012)

Bronte said:


> You mention dim view, but it's not illegal to operate this way.



Its a bit like driving along the roads on a semi-permanent basis with a glass or two of wine on you.  You may be legal (ie under the limit) some of the time but you will invariably drift into illegality (ie over the limit) at least occasionally. And when the law is broken, albeit perhaps unwittlingly, the trouble starts...


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## Bronte (4 Oct 2012)

T McGibney said:


> Its a bit like driving along the roads on a semi-permanent basis with a glass or two of wine on you. You may be legal (ie under the limit) some of the time but you will invariably drift into illegality (ie over the limit) at least occasionally. And when the law is broken, albeit perhaps unwittlingly, the trouble starts...


 

That's my post of the day, cheered me up no end.  I thought the cake thread funny but you've outdone yourself.


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## mandelbrot (4 Oct 2012)

One man's normal is another man's nightmare it seems!

I've not worked in practice for a couple of years, but when I did the nominal account with the most activity in some of my small Ltd Co clients was the directors current/loan account..! Guys who had gone from sole trader to Ltd Co and never could wrap their head around the concept that it wasn't still all their own money.


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## Paddy199 (4 Oct 2012)

I totally agree with Mandelbrot.

Company credit cards can also be a complete nightmare. It might be year end before you get to sit down with the director and go through all this expenditure.


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## Brendan Burgess (4 Oct 2012)

I would say that it is common, but it's a very dangerous practice for all the reasons which Tommy pointed out. 

If you make a once off payment, you will probably treat it ok. But if you pay an expense out of your company, and you don't account for it correctly, by accident, you would be very vulnerable if you have a revenue audit.

It's best to understand clearly the difference between a company and its directors and to manage their affairs separately.


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## Purple (4 Oct 2012)

Kildavin said:


> There is absolutely nothing unusual in this at all. It happens in tens-of-thousands of companies across Ireland.





mandelbrot said:


> One man's normal is another man's nightmare it seems!
> 
> I've not worked in practice for a couple of years, but when I did the nominal account with the most activity in some of my small Ltd Co clients was the directors current/loan account..! Guys who had gone from sole trader to Ltd Co and never could wrap their head around the concept that it wasn't still all their own money.





Paddy199 said:


> I totally agree with Mandelbrot.
> 
> Company credit cards can also be a complete nightmare. It might be year end before you get to sit down with the director and go through all this expenditure.



Why on earth would anyone put themselves in the Revenue's firing line by being that stupid and disorganised?
I would never use company money or a company credit card for any personal bills or payments. Madness.


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## Bronte (16 Oct 2012)

Purple said:


> Why on earth would anyone put themselves in the Revenue's firing line by being that stupid and disorganised?
> I would never use company money or a company credit card for any personal bills or payments. Madness.


 
Madness, well we'll see after Her Majesty's Revenue investigate (Sunday Business Post yestereday).  They want to look at all company spending by Sean Quinn.  Things are getting a lot hotter in Cavan.


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## delgirl (16 Oct 2012)

Purple said:


> I would never use company money or a company credit card for any personal bills or payments. Madness.


Seems there are people out there who do, i.e. the Stokes Brothers who spent €146,000 in personal expenses on company credit cards while their company was in difficulty, leaving creditors out of pocket. Looks like they got away with it with a very small wrap on the knuckles.


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## T McGibney (16 Oct 2012)

Bronte said:


> Madness, well we'll see after Her Majesty's  Revenue investigate (Sunday Business Post yestereday).  They want to  look at all company spending by Sean Quinn.  Things are getting a lot  hotter in Cavan.



I don't think HM Revenue have any jurisdiction in Cavan? 



delgirl said:


> Seems there are people out there who do, i.e. the Stokes Brothers who spent €146,000 in personal expenses on company credit cards while their company was in difficulty, leaving creditors out of pocket. Looks like they got away with it with a very small wrap on the knuckles.



Those boys' business practices are an example to nobody.


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## Luternau (16 Oct 2012)

Bronte said:


> We're not talking normal wedding here, where the daughter of a hotel owner absorbs say the catering and drinks cost which wouldn't be a very large figure really.  But a wedding costing a million, wouldn't that be more of a gift tax wise.



It was reported a few months back that a Company, sought to claim the VAT back on the cost of a wedding of a family member of a Director. The company owned the hotel that hosted the wedding and claimed the event was a marketing event.

Full article here;
http://www.independent.ie/opinion/analysis/tom-lyons-daughters-huge-wedding-bill-even-went-to-company-3154398.html


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## Bronte (17 Oct 2012)

Luternau said:


> It was reported a few months back that a Company, sought to claim the VAT back on the cost of a wedding of a family member of a Director.


 
Very interesting Luternau, the link is not working.  Did the company succeed in claiming back the VAT?

After one sees Starbucks paying not one pound of corporation tax on sales of millions in the UK, I've a feeling it's a lot more of a gain than VAT via the hotel for this wedding.  I'm sure the Quinns have accountants as good as those of Starbucks.  

(I'm not inferring any tax evasion - yet, so far tax avoidance - which is perfectly legal)


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## DB74 (17 Oct 2012)

Here's the link

www.independent.ie/opinion/analysis...edding-bill-even-went-to-company-3154398.html

The article states "an attempt was made to reclaim the VAT" but doesn't say whether it was successful or not


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## Bronte (17 Oct 2012)

T McGibney said:


> I don't think HM Revenue have any jurisdiction in Cavan?
> 
> .


 
You can live in Cavan and do business and declare tax in the six counties.  As Quinn does/did.


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## T McGibney (17 Oct 2012)

Bronte said:


> You can live in Cavan and do business and declare tax in the six counties.  As Quinn does/did.



His application for bankruptcy in Northern Ireland was rejected on the basis that his main residence and centre of business interests were both located south of the border.


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## smeharg (17 Oct 2012)

T McGibney said:


> His application for bankruptcy in Northern Ireland was rejected on the basis that his main residence and centre of business interests were both located south of the border.


 
My understanding is that this was the case at the time of the bankruptcy hearing.  You need to show your centre of interest being in the UK for atleast 6 months in order to claim bankrupty in the UK, which Sean Quinn was unable to prove (or IBRC were able to disprove).

Quinn headquarters is in Derrylin, Co Fermanagh where Sean Quinn had his office and worked and therefore paid taxes in the UK.  If the alleged payments were made from a UK company to its director(s) then HMRC would have jurisdiction regardless of where the director(s) are resident.


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## Luternau (17 Oct 2012)

Bronte said:


> Very interesting Luternau, the link is not working.  Did the company succeed in claiming back the VAT?



I will fix the link. The article did not state its sucess or otherwise. 



Bronte said:


> I'm sure the Quinns have accountants as good as those of Starbucks.



I think Starbucks paying no corporation tax on UK profits is totally different to this, but I could be wrong on that.


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## Bronte (18 Oct 2012)

Luternau said:


> I will fix the link. The article did not state its sucess or otherwise.
> 
> 
> 
> I think Starbucks paying no corporation tax on UK profits is totally different to this, but I could be wrong on that.


 
Ok the link now works.  How would the Independant know that the Quinn company tried to claim back the VAT.

My comparison with Starbucks is to point out that the wealthist people and companies can hire the best accountants, who are 'generally' able to keep one step ahead of revenue and therefore these companies seem to get away with paying a lot less tax than one would expect.  Revenue have respect for the big 4 accountancy firms and indeed are sounded out by the big 4.  To see what can and cannot fly.


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## Setanta12 (18 Oct 2012)

Bronte said:


> Revenue have respect for the big 4 accountancy firms and indeed are sounded out by the big 4.  To see what can and cannot fly.



Supporting link please.  

(I think you'll find its the other way around (s.811TCA1997))


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## Bronte (22 Oct 2012)

Kildavin said:


> Supporting link please.
> 
> (I think you'll find its the other way around (s.811TCA1997))


 
I don't need a link, I was in the office of one of the big 4 firms in the last 12 months (a tricky tax issue) and they have direct one on one contact with the tops in revenue.


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## T McGibney (22 Oct 2012)

Bronte said:


> I don't need a link, I was in the office of one of the big 4 firms in the last 12 months (a tricky tax issue) and they have direct one on one contact with the tops in revenue.



You'd have to wonder about the ethics of that sort of carry-on. Its all about who you know.


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