Time off between contracts

[The Coal Man]

Hi

My year long contract finishes end of May, am taking about a month off to sort things out at home etc, before jumping back on the contracting treadmill again.
Should I tell my accountant about this and also can I take out any dosh from the company bank account to tie me over during this time.
Anything else to consider or that I should bear in mind or that I might have overlooked, just thought I would ask as this is the first time I've taken a break from contracting.

Cheers.

[tim123]

Once again I am gobsmacked in amazement.

You have been contracting for 12 months and you don't have enough money in your personal bank accounts to pay your expenses for a month off! WTF are you going to do if you have an enforced break of 3, or even 6, months?

As to your questions:

1) No you don't need to tell your accountant, (s)he isn't your personal nanny. (but see 2).

2) Yes you can take money out of the company but you need to account for it properly, in which case you DO need to talk to your accountant.

3) You have overlooked the need to save for a rainy day. I suggest you get some practice in ASAP.

tim

[oxtailsoup]

I'm confused by your reply Tim. May be I have misread the original post but the way I read his situation is that can he still draw a salary from his company for the time he is not working. He shouldn't have to have saved up for a rainy day in his personal bank account to do this, he should have surplus in his business account to do this surely. Or may be a bit of both. But either way he's entitled to take money out of his company account (salary or divi) whilst he's having a break.

Personally I take out the same salary plus divi's every month. Any surplus is in my business account (for rainy days). In March I re-evaulate the situation and take the maximum divi's I can up to the 40%. The rest I leave in the company 'for a rainy day'. So if I'm ever out of work I know I've got plenty of money in the business to keep paying me a salary.

[VectraMan]

Now this is the difference between being in business and being a "disguised employee". A business will be planning ahead to ensure there's enough money to meet salaries and other ongoing costs through any lean periods. If you can't pay those salaries, then you're insolvent. If you can't pay those salaries because you've already paid too much in dividends, then you may find yourself in some trouble.

Of course as a director you can choose not to pay yourself your salary rather than have the company go bust.

So not only can you pay your salary, you should pay your salary.

[rootsnall]

Now this is the difference between being in business and being a "disguised employee". A business will be planning ahead to ensure there's enough money to meet salaries and other ongoing costs through any lean periods. If you can't pay those salaries, then you're insolvent. If you can't pay those salaries because you've already paid too much in dividends, then you may find yourself in some trouble.

Of course as a director you can choose not to pay yourself your salary rather than have the company go bust.

So not only can you pay your salary, you should pay your salary.

Thank you for that most informative post.

[tim123]

Now this is the difference between being in business and being a "disguised employee". A business will be planning ahead to ensure there's enough money to meet salaries and other ongoing costs through any lean periods. If you can't pay those salaries, then you're insolvent. If you can't pay those salaries because you've already paid too much in dividends, then you may find yourself in some trouble.

Of course as a director you can choose not to pay yourself your salary rather than have the company go bust.

So not only can you pay your salary, you should pay your salary.

I don't agree with the final analysis.

Taking your nominal monthly salary is not going to make one jot of difference as to whether you are a 'business' or not.

Of course you have to make sure that there is enough money in a 'resting' company to pay normal expenses, but it is usual for directors to stop making drawings during lean periods and doing so proves absolutely nothing.

tim

[The Coal Man]

Once again I am gobsmacked in amazement.

You have been contracting for 12 months and you don't have enough money in your personal bank accounts to pay your expenses for a month off! WTF are you going to do if you have an enforced break of 3, or even 6, months?

As to your questions:

1) No you don't need to tell your accountant, (s)he isn't your personal nanny. (but see 2).

2) Yes you can take money out of the company but you need to account for it properly, in which case you DO need to talk to your accountant.

3) You have overlooked the need to save for a rainy day. I suggest you get some practice in ASAP.

tim

In answer to your replies above:

1 / 2) I will be telling my accountant as I will still be paying myself a salary from the company bank account and thats it, no dividend.

3) Not sure what you mean here, but I have enough in reserve for the short term, I've not perceived it to be a rainy day, just a cloudy one with sunny spells in the late afternoon !

Cheers for your replies everyone, I appreciate it.

[VectraMan]

I don't agree with the final analysis.

Taking your nominal monthly salary is not going to make one jot of difference as to whether you are a 'business' or not.

Of course you have to make sure that there is enough money in a 'resting' company to pay normal expenses, but it is usual for directors to stop making drawings during lean periods and doing so proves absolutely nothing.

tim

Well I wasn't looking at it so much as an IR35 defence, and yes I agree with what you say. However, if there's money in your account why would you not pay your salary? By definition, salary is an ongoing cost. Paying a dividend whilst the company has no current or future income would be a bit irresponsible, but salary isn't part of that.