Recording capital on abbrev accounts

[CharlieJ]

Seen similar threads but cannot quite find the answer:

1. I formed a ltd co, stated there were 1000 shares at nominal value of £1 ea all of which were allotted to me as director.
Two shareholders then invested a total of £6000. I did not pay cash into the company for my 1000 shares, but they are recorded as 'paid up'. I understand this can be 'in kind' eg for services (as director).

How do I show this discrepancy in the final accounts I submit with my Corp Tax return? Ie. a capital of £7000 supposedly but only £6000 deposited into business?

2. Partly the cause of this problem is that I mistakenly attributed the £6000 to 250 Ordinary B shares at nominal value of £24 ea. (Pretty sure I got advised so by someone over the phone at Co House!). My accountant has explained I should have given them £1 nominal value, then the rest to the share premium.

Can I amend this easily with Companies House (without getting penalised)?! I submitted this incorrect info in the brief WebFiling of Annual return in June 2008.

Haven't yet submitted my Corp Tax return with accounts to HMRC nor to Co House.

Many thanks

[MyAccountantOnline]

If you have got an accountant they would genereally deal with this for you and it would be best to get them to do so.

[CharlieJ]

Yeah I know, but he's a friend and not as familiar with this topic. They did explain what I'd done wrong re share value. They're also busy and I like to understand as much as poss myself anyway. Just wondering if there's a simple way round my mistake.

[GaryMc]

For info, you cannot submit abbreviated accounts with the CT600 - it has to be the full accounts that should be prepared for the members (shareholders) of the company

[CharlieJ]

Thanks Gary, that's important to know!

[CharlieJ]

BTW, I now know I can fix my share nominal value mistake with a form to Co House.

The fact I haven't paid cash for my 1000 ordinary shares, can anyone tell me - can I put that as 'Called up share capital not paid' on my accounts?

[David Griffiths]

Yeah I know, but he's a friend and not as familiar with this topic. They did explain what I'd done wrong re share value. They're also busy and I like to understand as much as poss myself anyway. Just wondering if there's a simple way round my mistake.

And he's an accountant in practice?

Charging people to do their accounts?

Really?

[Finance Tim]

Answer to question 1 is that if your £1000 contribution was by way of services as a Director then £1000 needs to go as the first cost of your business (Directors Remuneration). ie. Directors Remuneration £1000. However you will need to include this as part of your remuneration for PAYE and pay tax/ni on this "income" that you have chosen to invest in NewCo.

You could show this in different ways in your accounts but one would be to have an opening balance sheet of Prepayments £1000 (for your services yet to be rendered) and the Share Capital £1000.

When the new shareholders paid their £6000 and assuming at this stage you had not actually started trading, your balance sheet would show cash in the Bank of £6000 and either the prepayment of £1000 still sitting there (or if you have by now performed the £1000 worth of services - a loss so far of £1000) to equal the share capital of £7000.

Hope that helps - but don't get to hung up on accounting practices as long as you clearly record what you are doing. Most stuff can be sorted out by your accountant in a minute at the year end.

[David Griffiths]

your balance sheet would show cash in the Bank of £6000 and either the prepayment of £1000 still sitting there . . . to equal the share capital of £7000.

Hope that helps - but don't get to hung up on accounting practices as long as you clearly record what you are doing. Most stuff can be sorted out by your accountant in a minute at the year end.

Overlooking the apparent fact stated in the first post that the authorised share capital is £1,000. :)

[CharlieJ]

Thanks Tim and David.

My friend hasn't done straight accounting let alone tax for years, if at all in this country. He's in management/finance of some sort. And I do seem to complicate the matter with my bumblings. I have seen various differing opinions from other accountants on the arcane topic of tax too!

Cheers
Charlie

[CassioAcc]

Charlie,

I assume you accountant is a friend helping in their spare time. Whilst their intentions may be in the right place, you would really benefit from using an Accountant in Practice who will be up to date on all the latest developments.