Sole Trade -v- Limited Company

Discussion in 'Accounts & Finance' started by DFL, Mar 13, 2008.

  1. Adam93

    Adam93 UKBF Contributor Free Member

    Posts: 37 Likes: 5
    You have a point, but a lot of mortgage advisers/mortgage providers are aware more and more individuals are operating through a limited company. When our clients who operate through a ltd company and require mortgage documents the mortgage provider often requires an accountants certificate showing the turnover and profit of the limited company as well as the individuals personal income and reference to their shareholding.

    The reason they ask for this now is that it is possible that an individual is a sole shareholder of a million pound turnover business but their personal circumstances mean that they only withdraw a small salary and dividends - although if they wanted to they could withdraw much more!
     
    Posted: Jan 25, 2018 By: Adam93 Member since: Jan 18, 2018
  2. Taxed

    Taxed UKBF Contributor Free Member

    Posts: 41 Likes: 4
    @Adam93 thanks. That is good to know. Do you know if the same works with estate agents and renting? Often they have a minimum earning requirement to get a place, so people able to use the turnover or pre-tax profit from the LTD company would be useful.

    Also, there are two directors and they are 50/50 share holders and will be renting together (couple).
     
    Posted: Jan 26, 2018 By: Taxed Member since: Nov 4, 2016
  3. Adam93

    Adam93 UKBF Contributor Free Member

    Posts: 37 Likes: 5
    I have done a few Santander ones recently and on the accountants certificate they require you to itemise shareholdings between spouses and show their income separately.
     
    Posted: Jan 27, 2018 By: Adam93 Member since: Jan 18, 2018
  4. Taxed

    Taxed UKBF Contributor Free Member

    Posts: 41 Likes: 4
    Thanks. I'm talking to estate agents now about renting and how much rent they think I can afford each month.

    The pre-tax profits of the LTD company was about £41,000 which is just about enough to rent somewhere where I live (using the 30 x monthly rent figure).

    There was about £5,000 corporation tax.

    But after paying the corp tax and then both taking a salary and dividends we only had £36,000 income between us which isn't enough to rent somewhere here.

    If we'd been regular self-employed (not LTD company), our pre-tax income would be £20,500 each (£41,000).

    There was also the other LTD company expenses such as the accountant (£1200, use of home, etc) which we probably wouldn't have had if we were regular self employed and would've pushed our income on paper up more to perhaps £43,000 which would be better for trying to rent somewhere to live.

    Unless an rental estate agent would look at the LTD company accounts, we'd be better off being self employed and paying more tax but earning more on paper.

    Does no one else here rent and work through a LTD company? Or are you all making so much you just pay 12 months up front in cash?
     
    Posted: Feb 2, 2018 By: Taxed Member since: Nov 4, 2016
  5. Taxed

    Taxed UKBF Contributor Free Member

    Posts: 41 Likes: 4
    Also, is it possible to take all the profit from the business as a salary so there is no corporate tax paid?

    Say the LTD had a turnover of £50,000 with £5,000 expenses, could the £45,000 be paid as a salary?

    Instead of doing £50,000, minus £5,000 expenses, minus £8,000 salary, minus corporation tax, with the rest going out as dividends?

    Also, do you have to claim all expenses? Such as working from home allowance, internet costs, etc? Or is that fraud as it makes it look like the business has earned more than it did?

    Thanks
     
    Posted: Feb 5, 2018 By: Taxed Member since: Nov 4, 2016
  6. Scalloway

    Scalloway UKBF Legend Free Member

    Posts: 12,666 Likes: 2,724
    Yes you can pay whatever salary you want. You have no obligation to claim these expenses.

    Can I suggest starting a new thread? There are a number of people who post regularly about how to get a mortgage but I suspect they never look at this particular thread.
     
    Posted: Feb 5, 2018 By: Scalloway Member since: Jun 6, 2010
  7. Taxed

    Taxed UKBF Contributor Free Member

    Posts: 41 Likes: 4
    Thanks, will do!
     
    Posted: Feb 5, 2018 By: Taxed Member since: Nov 4, 2016