Limited do's & dont's

[mrjonathanbrown]

Hi guys

I have recently registered my business with companies house.

I am the director with 60% shares and my partner owns 40%.

For a few years I myself had been operating as a sole-trader, however it was time for us to go down the route of incorporating.

My question is what now?

We've just opened a business account with the bank, still not started trading tho.

We want to pay ourself a wage, £112 each per week.

But in some instances we may not be able to take a wage or at least a full wage, what happens in this scenario?

I think if we earn £112 per week we need to register with hmrc?

Also what about the company and its taxes? Should I have a separate UTR number for the company to fill in its taxes? Mental question i know!

Any help would be appreciated as always.

 

[Bob]

As pointer for other people, this sort of question needs to have been asked and answered before incorporating.

Do you have an accountant?

 

[john1989]

Some of these questions have already been answered in another question you posted.

You can credit the wage to your DLA and draw down the funds when the company is able to do so.

Whether or not you need to operate a PAYE scheme depends. Some guidance can be found here:
https://www.gov.uk/paye-for-employers/paye-and-payroll

Yes, the company will have its own UTR.

You'll also need to deal with transferring from a sole trader to limited. Just opening a company is not sufficient.

I'd also head over to the insolvency section of this website. There is a common them in that very few took professional advice.

 

[Ian J]

I am not one of the many number crunchers on this forum who tend to respond with "ask your accountant" or similar to most requests for help but in this instance it is quite important that you take advice from an accountant on various matters like the best month to start trading and how much goodwill can you transfer over to the company as you could end up paying far more tax than necessary

 

[ME Accountants]

In the past before RTI many directors would have their salary credited to their loan accounts however I have been keen to have all my clients set up on monthly payroll so that the amounts being paid on the payroll match to what is going into their personal bank account each month.

When your personal tax returns are submitted HMRC will then be able to compare the salary declared on your returns to the RTI reports your company has submitted so they match.

Yes you will need to have a corporation tax UTR which is sent to you once you have register with companies house. You will also need to register for a company PAYE reference and accounts office reference which can be done online.

At this stage it is extremely important for you to appoint an accountant who will be able to set all this up for you.

 

[john1989]

In the past before RTI many directors would have their salary credited to their loan accounts however I have been keen to have all my clients set up on monthly payroll so that the amounts being paid on the payroll match to what is going into their personal bank account each month.

What does it matter if it goes to their personal bank account or DLA?

 

[Bob]

I am not one of the many number crunchers on this forum who tend to respond with "ask your accountant"

The problem @Ian J is that the reason that that response is given is that there is insufficient information provided. In those cases, the best response is often that they should consult a professional to whom they can provide all of the necessary information about their personal circumstances and their business. They should then receive a reasoned response relevant to them. In this case, they should clearly have sought that advice before incorporating

 

[ME Accountants]

What does it matter if it goes to their personal bank account or DLA?

It could matter for a mortgage in the future. I have also had a case recently where my client a Limited company director was required to submit details of income to the home office for visa purposes and they wanted payslips to tally with his personal bank account. In his case it did not so the payroll had to be redone. Of course this is a different situation but in my opinion it is best to tie it up like this.

 

[Bob]

But aren't you doing the same payslips however the wages are paid?

 

[ME Accountants]

But aren't you doing the same payslips however the wages are paid?

Yes you are but an issue would arise if bank statements are also requested and payslips do not then tally with bank statements. Im not saying it cannot be paid into the loan account but just to be aware of this for purposes such as loan/mortgages.

 

[john1989]

It could matter for a mortgage in the future. I have also had a case recently where my client a Limited company director was required to submit details of income to the home office for visa purposes and they wanted payslips to tally with his personal bank account. In his case it did not so the payroll had to be redone. Of course this is a different situation but in my opinion it is best to tie it up like this.

I've not come across this before.

With potentially salary, dividends, drawdown from DLA and reimbursement of expenses, the income going into the personal bank account will rarely reconcile to payslips.

I would have thought a simple explanation would have sufficed.

 

[ME Accountants]

I've not come across this before.

With potentially salary, dividends, drawdown from DLA and reimbursement of expenses, the income going into the personal bank account will rarely reconcile to payslips.

I would have thought a simple explanation would have sufficed.

Yes I agree however as I have come across this before I thought I would share it as it is possible.

 

[kevin.doran]

Any lender worth their salt should understand how an LTD is run, i've never had one query why the amounts physically being transferred across to the personal a/c don't perfectly match the salary & divi. It's all about knowing which lender to speak to in the first instance.

 

[Ian J]

The problem @Ian J is that the reason that that response is given is that there is insufficient information provided. In those cases, the best response is often that they should consult a professional to whom they can provide all of the necessary information about their personal circumstances and their business.

In this case I agree which is why I suggested the importance of discussing it with an accountant but unfortunately the response of "discuss it with an accountant" is given in other instances when it would be easy to provide an answer but the accountant responder is actually angling for a new client instead.

I may not post much in the accounting forum but I do read a lot

 

[tony84]

Lenders do not usually ask for payslips for self employed people.

Self employed is generally classed as a 25% plus shareholding.

Some would want SA302s/Tax year overviews, others would want accounts and others an accountants reference.

 

[john1989]

In this case I agree which is why I suggested the importance of discussing it with an accountant but unfortunately the response of "discuss it with an accountant" is given in other instances when it would be easy to provide an answer but the accountant responder is actually angling for a new client instead.

I may not post much in the accounting forum but I do read a lot

I think sometimes it is used as a disclaimer.

Whilst an accountant can answer a forum question, they can't give detailed advice on a forum and they don't know if the poster is asking the correct question.
This question is a perfect example of that. The ask whether or not they need a PAYE scheme for a salary of £112 - we can provide a yes or no answer. But a meeting with an accountant will delve into the effect on corporation tax, national insurance contributions and other taxable income the OP might have.

I don't think a forum is a suitable platform for detailed advice, and in most cases, speak to an accountant is far from being unhelpful.

And lets not forget, the advice to see a commercial solicitor in the legal forum is a regular occurrence, but nobody bats an eyelid. I guess accountancy isn't seen as a worthwhile expense.

 

[MyAccountantOnline]

.......

We want to pay ourself a wage, £112 each per week.

But in some instances we may not be able to take a wage or at least a full wage, what happens in this scenario?

.......

You can add it to a loan and withdraw it when the company can pay it - thats fairly common practice you'll see people refer to it as a directors loan.

.......


I think if we earn £112 per week we need to register with hmrc?

.......

Have a read here it explains when you need to register -
https://www.gov.uk/register-employer

.......

Also what about the company and its taxes? Should I have a separate UTR number for the company to fill in its taxes? Mental question i know!

.......

Yes the company is a separate legal person to you and has to be registered for tax (in the same was as you did as a sole trader)

Dealing with company accounts and tax isnt in my opinion easy for someone without experience and accounting qualifications but if you do want to DIY here are some links for you -

https://www.gov.uk/topic/business-tax/corporation-tax

https://www.gov.uk/government/publications/life-of-a-company-annual-requirements

 

[kevin.doran]

I think sometimes it is used as a disclaimer.

Whilst an accountant can answer a forum question, they can't give detailed advice on a forum and they don't know if the poster is asking the correct question.
This question is a perfect example of that. The ask whether or not they need a PAYE scheme for a salary of £112 - we can provide a yes or no answer. But a meeting with an accountant will delve into the effect on corporation tax, national insurance contributions and other taxable income the OP might have.

I don't think a forum is a suitable platform for detailed advice, and in most cases, speak to an accountant is far from being unhelpful.

And lets not forget, the advice to see a commercial solicitor in the legal forum is a regular occurrence, but nobody bats an eyelid. I guess accountancy isn't seen as a worthwhile expense.

£8060

 

[john1989]

£8060

Hahahaha.

 

[nelioneil]

Get an accountant.

There - I said it.

 

[UK Contractor Accountant]

And lets not forget, the advice to see a commercial solicitor in the legal forum is a regular occurrence, but nobody bats an eyelid. I guess accountancy isn't seen as a worthwhile expense.

Yes and let's not forget that go consult factoring broker also crops up a few times when finance is discussed

 

[Ian J]

Yes and let's not forget that go consult factoring broker also crops up a few times when finance is discussed

What part of "it is quite important that you take advice from an accountant on various matters like the best month to start trading and how much goodwill can you transfer over to the company as you could end up paying far more tax than necessary" was it that you had trouble understanding