End of Year deficit

**moorfield** · 22 August 2008, 15:32

Originally posted by Daxis View Post

Guys, can you help with a bit of advice?

This is my first year contracting and I've been taking a salary, expenses and dividends from my bank a/c each month.

I've just realised that I hadn't accounted for the Business Expenses that have come direct from the account, the upshot is that when I did a quick workout of my status it looks like my end of year CT liability, VAT & PAYE will be greater than the Credit Balance in my Bank Account.

Do I need to worry about this, or as long as I "accumulate" sufficient money to pay the CT when its due in 9 months I'll be ok ?

Thank You
Daxis

I assume you are not using an accountant then??

In the short term your cashflow will probably be ok while you are billing as CT, VAT, PAYE are paid at different times throughout the year.

But if you've not accounted for business expenses then you've probably been overpaying yourself in divis - if so you need to get that tidied up in your year end accounts, recalculate/redo all your divi certificates etc. and pay back any excess to your ltdco.

**NotAllThere** · 23 August 2008, 05:37

Divvies must only be taken out of profit. You've taken more than the profit. This is bad thing.

Redo your dividend paperwork and accounts, so that you've only paid out of profit. Convert the overpayment into a loan. Pay back the loan.

**Bluebird** · 26 August 2008, 08:03

I would presume that if you are paid monthly, and your end of accounting period is at the end of the month you could cover the shortfall this year by doing the following.

End of Year a/c 31/10/08 - deficit = £4000
Invoice for Month to 31/10/08 = £4500

Don't pay any dividends for October until AFTER 1/11/08.

If you then pay on say 2nd of November, your end of year balance sheet will llok finr, then you need to recover the £4k as quickly as possibly by paying less divi each month until it's recovered and your ok again.

End of Year deficit