What is a shareholder current account?

The Shareholder Current Account (SCA) is a vital concept in business finance, yet it remains one of the most confusing, especially for newer business owners. We hear the question often "my company made a profit and declared a salary, but where is the cash?"​

It's a completely fair question. It can feel like you are your company sometimes, but the reality is that the company has its own legal status.​

In its simplest form, the Shareholder Current Account (SCA) is a record that tracks the movement of money between two separate legal entities: you (as the shareholder) and your company. Think of it as a flexible loan account between you and the business.​

This account is particularly significant when the company is owned by more than one person, as it clearly defines what the company owes each owner, and vice versa.​

When a company needs money, it essentially has 3 main ways to get it - from a bank, a third party or from shareholders.​

The bank transfers the loan amount to the company’s operating account. The company owes money to the bank, shown as a Bank Loan on the Balance Sheet.​

A third party transfers money to the company’s operating account. The company owes money to that individual/entity, shown as a Loan on the Balance Sheet.​

You, the owner, deposit personal money into the company’s bank account (or pay for some company expenses personally). The company owes you that money. This is a liability on the Shareholder Current Account, and also shows on the Balance Sheet.​

The goal is always to have a positive SCA balance, where the company owes you money i.e. has a liability owing to you.​

You'll usually see the 'Shareholder Current Account' as a key line item on a company's Balance Sheet. (A trust can have a Beneficiary Current Account, which is similar in nature).​

The movement in the shareholder current account is made up of two types of transactions - cash transactions and year-end accountant adjustments.​

These are straightforward as they involve direct movement in the company’s bank account.​

Increases to the SCA (company owes you): when you deposit personal money into the company (known as Funds Introduced or Cash Deposits), or when you pay for company expenses yourself (not with company funds or card).​

Decreases to the SCA (you owe the company): when you withdraw money from the company for personal use, or when the company pays for your personal expenses (known as Drawings).​

As accountants, our aim is always for you to pay the least amount of tax legally possible, so at year-end we make adjustments to shareholder current accounts when preparing the company’s financial statements.​

Shareholder Salary (increases SCA)​

At the end of the year, we review the company's profit. As you likely have a lower personal tax rate than the company, we may allocate a salary to you out of the profit. This simply moves (part of) the profit from the company to you. Since no cash changes hands, the company still owes you that salary, and your SCA increases. This figure is included in your personal tax return.​

Home office expenses (increases SCA)​

If you use your home for business, the company needs to reimburse you for that privilege (rent, power, internet etc.). We calculate the business-use amount and include it as a Home Office Expense for the company. As no cash changes hands, the company owes you this money, which increases your SCA.
Need a refresher on what you can claim? See our guide on how to correctly claim your home office expenses.​

Motor vehicle use​

This is a common adjustment when a vehicle is used for both business and personal travel. The impact on your shareholder current account depends on who legally owns the vehicle.​

If you own the vehicle personally: you’re paying the running costs (fuel, insurance, maintenance etc) so the company needs to reimburse you for the business-use portion of these. We calculate the appropriate amount based on mileage/records. The company doesn’t physically pay you, so this increases your SCA (known as Motor Vehicle Expenses, but often grouped within Funds Introduced).​

If the company owns the vehicle and it’s available for you to use for personal trips: this is considered a benefit to you as the company is covering the running costs. You need to reimburse the company for this benefit. We calculate the amount, and this figure decreases your SCA (known as Motor Vehicle Reimbursement, but often grouped within Drawings).​

Curious about what's claimable? Read our post: What motor vehicle expenses can I claim for my business?​

The diagram below combines what we’ve explained above into a simple visual to give you an idea of what causes an increase to a shareholder current account and what cases a decrease to the account.​

If you take more money from the company than you put in, you will have an overdrawn SCA. This means you owe the balance to the company (essentially, the company has given you a loan).​

An overdrawn current account is almost always a warning sign of financial pressure. If your accountant says your SCA is overdrawn, please take it seriously and make time to understand what’s happening.​

The IRD requires the company to charge a shareholder interest on an overdrawn SCA, based on set IRD rates. You don’t physically pay this, it’s simply an adjustment made by your accountant at the end of the financial year. The interest becomes income for the company and is reflected in your shareholder current account. If interest isn't charged, then the company will need to pay fringe benefit tax on it instead.​

If you find yourself with an overdrawn SCA, it's vital to address it quickly to avoid compounding interest charges and serious consequences. You have two primary ways to clear or reduce the balance:​

Introduce Funds: The most straightforward way is for you to personally transfer money back into the company’s bank account. This acts as a cash repayment of the loan, immediately reducing the amount you owe.​

Offset with Income: If the company is due to pay you money (such as an upcoming Shareholder Salary or reimbursement for expenses), you can choose to apply that payment directly to the outstanding SCA balance instead of receiving the cash. This uses the company's liability to you to offset your liability to the company.​

Understanding your Shareholder Current Account is essential for business management. Here are a few important things to remember.​

Keeping these in mind ensures good financial governance, reduces tax risks and strengthens the financial health of your business.​