Ltd salary & expenses when out of contract

[wildkat]

Hi All, I have been on the bench for a couple of months now after starting up my limited company a year ago. This is the first time ive been out of work so have not paid any salary/dividends to myself.
I just wanted to ask what the normal process is for expenses/salary when your out of contract and running a limited company..
Do I continue as I am (ie no expenses and no monthly payslips) or should I be doing this another way?
Many Thanks.

[Gonzo]

Hi All, I have been on the bench for a couple of months now after starting up my limited company a year ago. This is the first time ive been out of work so have not paid any salary/dividends to myself.
I just wanted to ask what the normal process is for expenses/salary when your out of contract and running a limited company..
Do I continue as I am (ie no expenses and no monthly payslips) or should I be doing this another way?
Many Thanks.

The answer will depend on how you have been running your company, points to consider are:

You wouldn't necessarily stop paying yourself salary just because you are out of contract. Have you discussed this with the person that submits all the PAYE returns to HMRC? - you wouldn't want the returns to move out of step with what has really happened.

You wouldn't necessarily stop paying your expenses either, again you are still incurring these whether you are in a contract or not.

If you were to continue to pay salary and expenses then you would need to have the money in your company to do be able to do so. If you have been taking all the money out via Salary and dividends on a monthly basis up until now (and the way you have framed the question suggests you might have been) then you won't have the funds to continue paying yourself anything.

Once again, the answer depends on how you have been operating your company - have you asked your accountant?

[The Lone Gunman]

As Gonzo said, it depends on your company.

You can still pay salary and expenses even if there is no contract. You must not pay out money the company does not have. Expenses must be legitimate. As expenses are required to be for the purposes of work you might struggle with some when you have no contract.

[Archangel]

As the other have said.

I have been out for a couple of months, but I am using the company reserves (built up over a few years) to continue to pay salary and the occasional dividend. I do not have any expenses, but the company is also still paying the nursery vouchers for my son.

If your company has no reserves (and please do not count the corp tax and vat as reserves!) then it can't pay, if it has then it can.

[The Lone Gunman]

As the other have said.

I have been out for a couple of months, but I am using the company reserves (built up over a few years) to continue to pay salary and the occasional dividend. I do not have any expenses, but the company is also still paying the nursery vouchers for my son.

If your company has no reserves (and please do not count the corp tax and vat as reserves!) then it can't pay, if it has then it can.

You need to be careful with the divvi payments. You have to be sure that you only pay the divs out of profit. You may be asked to justify how you knew the company would make a profit if it had no source of income. It is not realy hard to do, but they may ask.
Just be careful.

[Grinder]

If your company has no reserves (and please do not count the corp tax and vat as reserves!) then it can't pay, if it has then it can.

You can continue to pay company expenses incl salaries out of your corp tax fund. Once it has all gone, you will have made no profit and therefore there would be no c-tax to pay

[Mustang]

Expenses must be legitimate. As expenses are required to be for the purposes of work you might struggle with some when you have no contract.

When on the bench, I identify myself as in "Sales mode". All companies have expenses related to their sales staff and i see myself as no different. As long as the expense is in conjucntion with seeking new business then I feel I can justify it!

Remember.........IANAL!!

[Mustang]

If your company has no reserves (and please do not count the corp tax and vat as reserves!) then it can't pay, if it has then it can.

If necessary (reserves dry up or are close to....) the Company can get a loan to finance Operational expenses (incl salary) whilst new business is being sought. Why should we be any different from other businesses. This would depend on your bank and your confidence that you will find work. There is risk involved (potentially huge) so you have to be prepared to take the gamble.......!

As always, remember I am not qualified to give this advice!

[moony1234]

With regards to someone above saying you cant pay yourself if the company doesnt have the money, surely you can pay a salary out of the overdraft?

Not wise obviously but surely this isnt illegal/dodgy?

If you KNEW you had a contract lined up in x months time and the money would be replenished...

[PhilAtBFCA]

Paying yourself whilst not working

moony1234

With regards to someone above saying you cant pay yourself if the company doesnt have the money, surely you can pay a salary out of the overdraft?

Not wise obviously but surely this isnt illegal/dodgy

I think this may not be too tax effective. You could borrow less money personally ( and easier probably ) and use that to live on, then pay tax on a salary when the company can afford to pay you.

Mustang

When on the bench, I identify myself as in "Sales mode". All companies have expenses related to their sales staff and i see myself as no different. As long as the expense is in conjucntion with seeking new business then I feel I can justify it!

Yes I think thats a wise move. We have many people who think their company has "ceased to trade" or is "dormant" when they are not working. technically all that has happened is that they are not selling any services. Ceasing to trade may happen later, if no further sales are to be found.

During this interim period of looking for new opportunities the company continues to run, expenses continue to be bourne and deadlines for HMRC and Companies House continue to be required !

Phil