Accounts Questions - A few!!

Discussion in 'Accounts & Finance' started by livingthedreamok, Feb 13, 2019.

  1. RCW20025

    RCW20025 UKBF Newcomer Free Member

    21 0
    Question 1:

    No you don't really need to but £700 for accounts, corporation tax submission, personal tax return and payroll is a reasonable fee.

    Question 2:

    The amounts in creditors are most lostkely to be corporation tax and the accountant's bill

    Question 3:

    Correct - bank balance doesn't affect tax

    Question 4:

    It's not clear whether this is a rent charge or a use of home as office expense claimed. Rent would usually entail a lease between you and the company, but has several other points of consideration e.g. personal tax, PPR etc. Rent is also usually contactual meaning you can't pick and choose whether to include it. There is much more flexibility with the use of home as office charge but really anything above £4/week is open to challenge from HMRC

    Question 5:

    The business profits can't repay a DLA only you, as the director can do this.
     
    Posted: Feb 14, 2019 By: RCW20025 Member since: Nov 26, 2018
    #21
  2. RCW20025

    RCW20025 UKBF Newcomer Free Member

    21 0

    It doesn't... the double entry to add in the £3k rent would be
    Dr Rent
    Cr DLA

    Therefore you can draw £3k from the company (subject to income tax). If you wish to take out another £37k this would need to be split between salary, dividends and drawings each subject to their own individual tax treatments.
     
    Posted: Feb 14, 2019 By: RCW20025 Member since: Nov 26, 2018
    #22
  3. Newchodge

    Newchodge UKBF Big Shot Free Member

    12,298 3,187
    Profits and the DLA are completely separate.

    The DLA is a liability of the company (in credit to you) if you personally have charged the company for rent and the company has not paid you.

    The DLA is an asset of the company (overdrawn) if you personally have removed money from the company that has not been justified as yours, because it is either rent, salary or dividend.
     
    Posted: Feb 14, 2019 By: Newchodge Member since: Nov 8, 2012
    #23
  4. livingthedreamok

    livingthedreamok UKBF Newcomer Free Member

    29 0
    Thank you for your response

    1. It's just Accounts and Corp nothing else, I do self assessment and theres no PAYE

    2. Thanks yeh I think that must be it

    3. Thanks

    4. It's a home office expense to be fair, it's not a contractual rent, we calculated based on number of rooms vs mortgage/rent etc (as i say the figures in the example are made up)

    I can't seem to get a simple answer or why I am missing something obvious

    Again made up figure for ease to understand (slightly more detailed example)

    £50,000 sales
    £10,000 salary
    £40,000 net profit
    £8,000 cap tax
    £32,000 paid to director (dividend)

    = £0 all hunky dory :)

    Mr accountant walks in

    £50,000 sales
    £10,000 salary
    £3,000 rent added as an outgoing by accountant to the accounts
    £37,000 net profit
    £7,400 cap tax (£600 saved)
    £31,600 paid to director (dividend)
    £400 advanced to director

    = -£400 overdrawn DL

    Is the £600 less CT more beneficial to me then the -£400 DL, is it as simple as that or have I missed something

    My head hurts :)
     
    Posted: Feb 14, 2019 By: livingthedreamok Member since: Feb 11, 2019
    #24
  5. RCW20025

    RCW20025 UKBF Newcomer Free Member

    21 0
    If you are being paid a salary then there should be associated payroll submissions.

    This doesn't make sense - £37,000 less £7,400 would be £29,600. Dividends can only be taken from net profit and reserves (though if you have always taken all net profit as dividends there will be none).

    You need to separate out the transactions

    In the above you can take out £29,600 as a dividend and £3,000 as a drawing (subject to personal tax) i.e you have taken out a total of £32,600. In your above scenario you have taken out £32,000 the £600 difference is the Corp tax saved element.
     
    Last edited: Feb 14, 2019
    Posted: Feb 14, 2019 By: RCW20025 Member since: Nov 26, 2018
    #25
  6. Newchodge

    Newchodge UKBF Big Shot Free Member

    12,298 3,187
    In your example

    Income 50,000

    Expenses Salary 10,000
    Rent 3,000
    Accountant fees 700
    Total 13,700

    Profit 50,000 - 13,700 = 36,300
    Corp tax @ 20% = 7,260

    Available for dividend 29040

    Your income 10,000 + 3,000 + 29040 = 42040
     
    Posted: Feb 14, 2019 By: Newchodge Member since: Nov 8, 2012
    #26
  7. Newchodge

    Newchodge UKBF Big Shot Free Member

    12,298 3,187
    I know you said that the figures are not accurate, but if you are getting a salary in excess of £6032 you must run a payroll
     
    Posted: Feb 14, 2019 By: Newchodge Member since: Nov 8, 2012
    #27
  8. livingthedreamok

    livingthedreamok UKBF Newcomer Free Member

    29 0
    Not if you under the threshold for PAYE

    Sorry your right, thought the £400 ODL looked wrong, I meant for the example

    £29,600 available, yet £32,000 paid creating a £2400 overdrawn DL

    So how has a £600 saving on DL benefited me now having a £2400 overdrawn DL
     
    Posted: Feb 14, 2019 By: livingthedreamok Member since: Feb 11, 2019
    #28
  9. livingthedreamok

    livingthedreamok UKBF Newcomer Free Member

    29 0
    Sorry we might be getting of subject, all i mean is my accountant doesn't do my PAYE
     
    Posted: Feb 14, 2019 By: livingthedreamok Member since: Feb 11, 2019
    #29
  10. Newchodge

    Newchodge UKBF Big Shot Free Member

    12,298 3,187
    Can I suggest that you have perfectly demonstrated why you do need an accountant. Possibly not the one you have if they cannot explain this to you, but you definitely need one.
     
    Posted: Feb 14, 2019 By: Newchodge Member since: Nov 8, 2012
    #30
  11. RCW20025

    RCW20025 UKBF Newcomer Free Member

    21 0
    Echo Cyndy's post above

    I don't know if your figures are the actual so it's difficult to comment. Did you insist on taking £32k out? You can't take dividends in excess of profit hence any additional amounts would be treated as drawings against the DLA your rent transaction should also have gone against the DLA though so the net effect should not be overdrawn in the end. If it is only your accountant can currently answer this.
     
    Posted: Feb 14, 2019 By: RCW20025 Member since: Nov 26, 2018
    #31
  12. livingthedreamok

    livingthedreamok UKBF Newcomer Free Member

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    :) yep agree, I think i'm answering my own question :) but I think it's a bit like talking to a mechanic when you don't known about cars, they could tell you anything and you take it on face value, I think I'm kind of wanting to try and understand it myself with others help, rather than rely on what they will tell me, as in fairness, if they made a doo doo would they tell the truth??
     
    Posted: Feb 14, 2019 By: livingthedreamok Member since: Feb 11, 2019
    #32
  13. Newchodge

    Newchodge UKBF Big Shot Free Member

    12,298 3,187
    You are ignoring the 3,000 rent thst you should have received. The 2400 overdrawn DL is a DL in credit by 600.
     
    Posted: Feb 14, 2019 By: Newchodge Member since: Nov 8, 2012
    #33
  14. livingthedreamok

    livingthedreamok UKBF Newcomer Free Member

    29 0
    Absolutely and I understand that, and that's why I monitor Turnover - Outgoings - Corp Tax leaves available drawings

    But when someone walks in after the tax year and adds £3K to the outgoings on paper doesn't this create the overdrawn DL or does this get credited to the DL and therefore doesn't actually matter

    Sorry if I'm sound thick, I just really like to have an understanding on how this works
     
    Posted: Feb 14, 2019 By: livingthedreamok Member since: Feb 11, 2019
    #34
  15. livingthedreamok

    livingthedreamok UKBF Newcomer Free Member

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    Ok so in fact although it's an outgoing it's also credited to the DL account? and therefore kind of contra's the whole thing?
     
    Posted: Feb 14, 2019 By: livingthedreamok Member since: Feb 11, 2019
    #35
  16. Newchodge

    Newchodge UKBF Big Shot Free Member

    12,298 3,187
    It is a company expense, so the company is debited. If it is an expense it has to be paid, either by you physically taking the money or by crediting the DLA.

    The basis of book-keeping is that every entry has to have a balncing entry. If someone pays your £500 invoice the bank account is credited and the sales ledge is debited.
     
    Posted: Feb 14, 2019 By: Newchodge Member since: Nov 8, 2012
    #36
  17. livingthedreamok

    livingthedreamok UKBF Newcomer Free Member

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    Yeh I kind of get the double entry, I think i was struggling to understand to why my drawings were in excess by around the same amount that the office expense was added to the outgoings
     
    Posted: Feb 14, 2019 By: livingthedreamok Member since: Feb 11, 2019
    #37
  18. Anna Chandley

    Anna Chandley UKBF Ace Free Member

    1,548 472
    Assuming you receive cash payments of £42,000 in both situations then in the first example your directors loan would be

    Balance b/f 0
    Salary payable 10,000
    Dividends payable 32,000
    Cash payments (42,000)
    Balance c/f 0

    In the second example your directors loan would be
    Balance b/f 0
    Salary payable 10,000
    Dividends payable 31,600
    Rent payable 3,000
    Cash payments (42,000)
    Balance c/f 2,600 (owed to you by company)
     
    Posted: Feb 14, 2019 By: Anna Chandley Member since: Jun 2, 2008
    #38
  19. RCW20025

    RCW20025 UKBF Newcomer Free Member

    21 0
    It creates a credit entry in the DLA. - the company owes £3k to the Director. The term overdrawn loan account is usually used when the Director owes the company money i.e. a debit balance in the company accounts.
     
    Posted: Feb 14, 2019 By: RCW20025 Member since: Nov 26, 2018
    #39
  20. d4ndy

    d4ndy UKBF Newcomer Free Member

    12 2
    open.ac.uk courses qualifications q91-acc

    6 years part time and 3 years full time!

    Enjoy.
     
    Posted: Feb 22, 2019 By: d4ndy Member since: Oct 16, 2018
    #40