Tax and finance difficulties/stress?

[AFLondon]

Deleting post

[northernladuk]

Hi All
I started contracting in Aug 2016, had accountants who did not conduct their proper services, messed up my P&L in FreeAgent so figures were all reflecting a healthy company, when it was actually not and tax was all over the place.

How is this possible? You put the numbers in Freeagent and it show's you the situation on the front page. How has the accountant messed it up?

I must admit I'd like to see the functionality that shows when CT was paid like it does for VAT. I'm pretty bemused why it doesn't.

I now have a really good accountant who is helping me sort out because I couldn't afford all of my Corporation Tax bill which was a big surprise, but I was under the impression that most other tax liabilities were caught up on.

I asked how long it'll take to get my head above water, and he said 3-4 YEARS, but i'm just incredibly confused as to how it could possibly be so long, after just 1 and a half years trading with the previous accountant? Does anyone have any ideas? I did ask but to be honest I feel like I've got myself into such a state (as I was planning on saving for a deposit...) that I can't articulate or understand fully.

I have been taking too much in dividends probably since the beginning which is why the bill was unaffordable (as I wasn't advised on this).

Also just like to add that I 100% realise that I should've been more clued up on tax etc, which I am now kicking myself for and regret even contracting in the first place, but this is the situation that I now find myself in and am doing my best to get to grips with it.

Thank you

We can't answer without seeing the numbers but I suspect it's something to do with the fact the dividends you extracted are deemed illegal due to them not being distributed from profit so they will have to be re-classified somehow. This would increase both the business (I think) and you personal liabilities. You haven't mentioned a hefty personal tax bill which sounds odd.
I wonder if he's used the Directors Loan option to rectify the illegal dividends (hence no extra personal tax). So the fact you owe (guessing) around 20k in CT + fines and interest plus a hefty directors loan (to cover the 20K of CT money you divied plus more so would be rather large) and possibly S455 issues if it's a large loan and so on and so on.

We can't really help without the numbers and even so we aren't the right people. Stick with your accountant. Get him to explain exactly WHY it's going to take this long. He's the only person that can help you. The only way to get out of situations like this, and any other debt situation is to fully understand why you are where you are and what you have to pay to get out of it. Until you understand the situation yourself it's very difficult to ask anyone else for advice.

[northernladuk]

I have been taking too much in dividends probably since the beginning which is why the bill was unaffordable (as I wasn't advised on this).

Sorry to be harsh but yes you were. You asked exactly what to do in this thread back in Sept 2016

https://forums.contractoruk.com/acco...ml#post2311127

[GreenMirror]

NLUK - I thought being a director was easy? I just take the money and ignore everything else. Are you suggesting I actually have a duty of care and have to do some work?

[AFLondon]

Sorry to be harsh but yes you were. You asked exactly what to do in this thread back in Sept 2016

https://forums.contractoruk.com/acco...ml#post2311127

Thanks for your help. My accountant didn't give me a figure or explanation based on what I was earning, and so I followed advice from this forum and other contractors.

[northernladuk]

Thanks for your help. My accountant didn't give me a figure or explanation based on what I was earning, and so I followed advice from this forum and other contractors.

And look where that got you.... but you are back again for more?

And reading back through that thread you had some really good solid advice. If you'd followed any of it you wouldn't be where you are now.

Time to take responsibility and thrash it out with the accountant. If it is as big a mess as you say and you've a payment plan to be clear of it in a few years then you should be able to rest easy. I am assuming this plan isn't impacting your personal take home? It's all company money so not really affecting your lifestyle so don't have to worry about that.

Get your head down, work with your accountant and just get on with paying it back. The light is most definitely on at the end of the tunnel.

[northernladuk]

NLUK - I thought being a director was easy? I just take the money and ignore everything else. Are you suggesting I actually have a duty of care and have to do some work?

I am sure the doing some work bit has come as a shock to you

[AFLondon]

And look where that got you.... but you are back again for more?

And reading back through that thread you had some really good solid advice. If you'd followed any of it you wouldn't be where you are now.

Time to take responsibility and thrash it out with the accountant. If it is as big a mess as you say and you've a payment plan to be clear of it in a few years then you should be able to rest easy. I am assuming this plan isn't impacting your personal take home? It's all company money so not really affecting your lifestyle so don't have to worry about that.

Get your head down, work with your accountant and just get on with paying it back. The light is most definitely on at the end of the tunnel.

The advice I got on here was the best advice i'd ever received for my accounts, everyone has much more experience than me (my first contract was my first job from uni) and I did follow it - for 6 months until my day rate drastically changed and I then played a guessing game based on accountants advice. Anyway, pointing fingers achieves nothing.

How do I delete this thread as I don't know what I aimed to achieve from it and to be honest, the amount of stress and overwhelming doom I feel is just getting worse through it.

[Chart Accountancy]

Deleting post as feeling more distressed than when I initially posted.

It sounds like that you spent the money for your corporation tax which would have created the issues described. Have you had your first year accounts filed already? If you provide some numbers for the taxes your accountant calculated and what is the balance on your directors loan account, alongside your future profit expectations? Otherwise, it is not clear why you have been advised that it would take you 3-4 years to recoup your finances.

[northernladuk]

The advice I got on here was the best advice i'd ever received for my accounts, everyone has much more experience than me (my first contract was my first job from uni) and I did follow it - for 6 months until my day rate drastically changed and I then played a guessing game based on accountants advice. Anyway, pointing fingers achieves nothing.

How do I delete this thread as I don't know what I aimed to achieve from it and to be honest, the amount of stress and overwhelming doom I feel is just getting worse through it.

No need to get stressed or doom. You have a good accountant sorting it out for you so work with him. You have a plan and it might take a couple of years so most definitely not the end of the world. Time will heal this one and in a few years it will be over and done with no blot on your company or person.

A good understanding of the situation is key here. Get that in your head and then just ride the wave. Understand what's happened, what you need to fix it and how. Once you've got that then just plod on.

The 3 to 4 years could be mitigated by just reigning in your lifestyle for a time so possible options reduce this drastically.

Believe me, we've had posters in much worse positions with no end in sight and they've worked it through fine and I believe are still around on the forums.