Am I expecting too much??

[NicoJ]

There is no de minimus for participator loans.

@Nebulous - when is the company year end? Sorry if I have missed this. And the date you became a Director would be helpful too.

Rather than everyone doing all these scenarios why didn’t one of your advisers just set up a payroll scheme for 22-23? No interest if no PAYE/NI and no penalties if a new scheme. A bonus would mean higher tax/NI in 23-24. And would have had to be agreed by the accounts date.

Obviously I don’t have all facts so there may be a reason why your new adviser is suggesting this.

£15k is the limit when the participator does not have a material interest in the company. We don't know the full details but I'm going to guess it doesn't apply here.

The original question was about the bookkeeper and the accountant, the further advice veered off the track to be honest, hopefully the new accountant can steer OP in the right direction.

 

[Newchodge]

There is no de minimus for participator loans.

@Nebulous - when is the company year end? Sorry if I have missed this. And the date you became a Director would be helpful too.

Rather than everyone doing all these scenarios why didn’t one of your advisers just set up a payroll scheme for 22-23? No interest if no PAYE/NI and no penalties if a new scheme. A bonus would mean higher tax/NI in 23-24. And would have had to be agreed by the accounts date.

Obviously I don’t have all facts so there may be a reason why your new adviser is suggesting this.

Why would you need a payroll scheme for 22/23 if no payroll is going to be run for that year?

 

[NicoJ]

Why would you need a payroll scheme for 22/23 if no payroll is going to be run for that year?

I think the suggestion is to run the payroll in 23 because that is clearly what the OP wanted and expected. It's therefore correcting a mistake rather than backdating.

 

[Newchodge]

I think the suggestion is to run the payroll in 23 because that is clearly what the OP wanted and expected. It's therefore correcting a mistake rather than backdating.

That would make sense, I suppose, but for what amount?

 

[NicoJ]

That would make sense, I suppose, but for what amount?

Given that the suggestion mentioned no PAYE/NI I would say up to the NI limit? Another option to think about and discuss with the new accountant.

 

[Nebulous]

There is no de minimus for participator loans.

@Nebulous - when is the company year end? Sorry if I have missed this. And the date you became a Director would be helpful too.

Rather than everyone doing all these scenarios why didn’t one of your advisers just set up a payroll scheme for 22-23? No interest if no PAYE/NI and no penalties if a new scheme. A bonus would mean higher tax/NI in 23-24. And would have had to be agreed by the accounts date.

Obviously I don’t have all facts so there may be a reason why your new adviser is suggesting this.

Hi SkyisGray, I became a Director in 2020. My company tax year currently matches the HMRC tax year.

Yes, sadly, the ship has sailed on the whole payroll for 2022-23 now so it's all about what's the best way forward based on where we are now.

In terms of the interplay between net income, corporation tax, salary, S455, no PAYE (not VAT registered as didn't meet the threshold), the two scenarios that have been put forward are pretty different in their amounts but they've arrived without explanation as to the pros/cons of each and I'm not an accountant so being able to figure that out myself isn't a practical option really.

My logic (this may be flawed!) is that since bank transactions evidence total of payments to me of c. £38k, then the accounts would have to show something matching that total (or exceeding it) for whatever amount remained over the salary amount that was agreed (if that makes sense). And that what that split would be would need to be a recorded decision recorded before the accounts are produced.

I'm unsure as to the best advice between what the new accountant suggested and what the existing one has put forward. I'd be happy to discuss figures in more detail but obviously not on a forum.

I think I need to ask the accountant to explain the two scenarios and their pros and cons just as a starting point, and also about what implications that gives me for 2023-24. Then I would run this info past new accountant before I ask for the final accounts to be run - and that will let me know whether I need to to to new account to see if he suggests a different approach or finds issue with the explanation or calculations.

 

[Nebulous]

What happened in the previous year regarding dividends?

People are assuming because you didn't take the dividend just before April 6th you have missed out.

But, if in previous years you took the dividend after April 6th it could just mean they are allowing for the dividend in the 1st few weeks of every year rather than the last few weeks of every year.

I made a small loss in 2021-22 so there were no dividends. The last time I had dividends was years before (2015-16) when I worked outside IR35 with a different Ltd Co and that was all managed by one of those firms that pretty much does the whole thing for you online, they act as accountant and do the SA etc.

 

[Nebulous]

Can I very strongly recommend you don't run payroll through Xero. It is a nightmare for experienced payroll practitioners. For a novice, I dread to think. Can't the new accountant do it?

Yes there's option for him to do it. He's v Xero-savvy so it's certainly an option to have him do it.

 

[TheSkyisGray]

that split would be would need to be a recorded decision recorded before the accounts are produced.

No, as advised above by DWS and others, that decision has to be made when the payment is taken or certainly in the same tax year. I thought you had intended to take salary so would have set up the scheme for you.

The £38k is a Director loan which will have to be disclosed in the accounts, P11D benefit declared*, included on the CT600 and the loan repaid within 9 months to avoid the 33.75% tax charge. You can discuss the split of the repayment between salary and dividends in 23-24 but nothing goes on your tax return for 22-23.

I advised earlier to check your engagement letters - you have suffered a loss but it is not clear whose fault it was.

* You would need a scheme for this anyway.

 

[Daybooks]

There is no de minimus for participator loans.

@Nebulous - when is the company year end? Sorry if I have missed this. And the date you became a Director would be helpful too.

Rather than everyone doing all these scenarios why didn’t one of your advisers just set up a payroll scheme for 22-23? No interest if no PAYE/NI and no penalties if a new scheme. A bonus would mean higher tax/NI in 23-24. And would have had to be agreed by the accounts date.

Obviously I don’t have all facts so there may be a reason why your new adviser is suggesting this.

Am sure they will apply s456 fully as applicable to their circumstances.

 

[NicoJ]

There is a clear intention to take salary and dividends. I would view this as a miscommunication between adviser & client and proceed on that basis.

Going forward you need to understand your responsibilities. You also need to be aware of what your accountant & bookkeeper are doing and how that corresponds with your instruction and understanding.

 

[MyAccountantOnline]

What should have happened is that you and the accountant should have sat down at the beginning of the accounting year and discussed what you wanted/ needed to take, your accountant should then advise whether this was feasible in the first place and secondly how you could do that in the most tax efficient way.

What has happened instead is that you have simply taken the amount you needed and your accountant is now trying to sort it after the fact.

Taking £38k in physical cash is not £38k in your accounts, it would need to be grossed up if its salary. If you don't have the profit, you can't declare a dividend. So, this is therefore going to have to be declared as a directors loan which then gives rise to more tax implications for both you and the company.

I totally agree.

I see this far too often when I take on new clients - simply drawing funds from the company as directors loans to sort out later creates so much unncessary admin, cost and tax.