PAYE and Accountant confusion

[TechR]

Hi

I just opened a limited company in April 16. With only 1 employee which is the director.
My accountant told me I can take out money from the business as I need and at the end of the year he will figure out the salary and dividends, and make the NI and Tax payment at the end of the year, as an annual salary.

However the PAYE website keeps informing me that I need to use an RTI tool to inform them when ever I take money. If I do not inform them on the day or before they will charge a late fee of £100 each time.

The accountant is adamant that I dont need to worry, and he will sort it out at the end of the year, and HMRC are stern that I must inform them on the day or the day before.

I prefer to do all the calculations at the end of the year, but also want to take out money when I need.
So I am totally confused on what to do, follow the accountants advice about take money when needed, and sort it out at the end of the year or the PAYE info.
The payments are not regular.

Thanks

X

 

[Scalloway]

You can do an annual payroll for RTI. Check with your accountant that this is what he is doing.

 

[UK Contractor Accountant]

Where you do not have a Director Loan balance owed from the company to offset the drawings from the company during the year I would not recommend leaving it to end of the year to fudge up with salary and dividends and overdrawn loan balances.

In such cases it should be done monthly - set yourself a monthly figure for salary and dividends (assuming the company has sufficient retained profits to pay dividends) and ensure all the necessary reports are filed and paperwork is completed.

 

[SteveHa]

Get a different accountant. He is not helping you at all, he is short cutting processes, he is potentially exposing you to a failure to operate PAYE charge from HMRC, and he is not aiding you in effective tax planning.

 

[STDFR33]

Tax planning at the end of the year is never a good idea. Neither is fudging everything to cover up a potentially overdrawn DLA.

I also don't think 'don't worry about it' is sufficient advice. How will you ever know what is going on with your company's finances?

The approach from your accountant is all a bit gung-ho for me.

 

[Darren@dynamoaccounts]

Agree with the guys above, reactive tax planning is not a recommended approach. Consider using some real time software like Freeagent, etc that gives you real time figures for taxes and also allows you to view the financial status at all times.....provided of course the data is input on a regular basis.

 

[MyAccountantOnline]

I suspect that your accountant is quite 'old school' several years ago I would say that was a fairly typical way to deal with directors salary and dividends.

Its certainly not what I do or recommend.

If you arent happy doing it like this tell your accountant, after all you are the paying client.

 

[TheCyclingProgrammer]

Doesn't seem like a good idea to me. Whilst you can in theory account for your drawings as a director's loan and clear it all up at the end of the year with a single annual RTI submission and dividends, it's likely to cause hassle.

For starters you're very likely to run into the £10k limit on the overdrawn loan account before you need to start charging yourself interest on the loan at HMRC rates or pay a BIK charge.

If you don't make a sufficient amount of profit to cover the ideal balance of minimal salary and dividends you may need to declare all of your drawings as salary and end up paying more tax than necessary.

IMO run payroll monthly (it takes a few minutes) and take dividends as required (subject to there being sufficient profit).