• Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
  • Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!

Advice welcomed re: PAYE pickle

Collapse
X
  •  
  • Filter
  • Time
  • Show
Clear All
new posts

    Advice welcomed re: PAYE pickle

    Hello,

    I wonder if anyone could possibly advise me on my situation below and suggest some good next steps for a bit of a PAYE pickle I have found myself in. At least, I think it's a pickle - it might not be a problem at all.

    I am the sole director of a LTD company that was incorporated in June this year. Previously, I was a sole-trader, but I registered as a LTD for liability purposes once my workload began to increase. As well as my work for the LTD, I also work as a self-employed contractor for other companies in a completely unrelated industry.

    The business, however, is still very small and has a modest turnover of around £30k - my annual income after expenses is roughly £15 - £18k.

    I am liquidating the business at the end of December as I'm being 'bought out' by another company - so, good news!

    However, I should pre-face the following by warning that I'm not very good at managing accounts, so I've got myself into a situation which I don't actually know whether it's good, bad or whether I need to do something to correct it.

    When I incorporated the business, I did not register for PAYE at the time. Instead, when I needed to pay myself, what I did was simply transfer money from the LTD account to my personal account. My expectation throughout was that I would then complete my self-assessment as normal and pay the tax/NI as due on this.

    Reading through some of the literature online, I now think that this is not an acceptable way to manage my accounts and may actually break several rules regarding PAYE. I didn't realise I was actually doing anything wrong.

    What I want to know is what I should do now to ensure that I'm completely above-board and to make sure I pay any monies that I might owe to HMRC? As indicated previously, I never intended to avoid any payments - I just didn't realise that this wasn't an acceptable way to pay myself.

    I didn't want to salary myself on PAYE as my income fluctuates so much - and also because my turnover is so small it didn't make sense to invest significant amounts of time and energy into a PAYE system when I am the only person involved with the business.

    So, what should I do?

    Should I call HMRC and be honest and say I think I've messed up - and how can I remedy this and ensure I've paid everything I need to? Are they likely to be sympathetic or could I be fined? It was an honest mistake and I don't really want to be fined given my income is so low.

    Is there a way of retrospectively giving legitimacy to my payments to myself? I have paid myself about 15 times since incorporation - can I go back and issue dividend certificates for each of these transfers? Or is it not possible to issue dividends without also having PAYE?

    What should I do to make sure I'm not breaking any rules?

    Alternatively, I've read about the concept of a Director's Loan Account. Could I class these payments from the LTD to me as part of the DLA and then 'write these off' (as per http://www.hmrc.gov.uk/paye/exb/a-z/...t-director.htm) and register for PAYE and pay NI/tax on this in that way instead?

    Once again, I really didn't mean to manage my accounts this way - I just didn't realise it was not the correct way to do things and I've always been used to doing things like a 'self-employed' person. I would happily pass this over to an accountant to see if they can sort it - but again I don't want them to come back with a bill for thousands!

    Any help would be gratefully received - as far as I can see there are several ways of doing things, but I want to make sure I correct any errors I've made and do things the 'proper way' from now on.

    Thank you.

    #2
    You say

    As well as my work for the LTD, I also work as a self-employed contractor for other companies in a completely unrelated industry.
    and then you say

    hat I'm not very good at managing accounts,
    So why on earth did you not get an accountant before running multiple incomes, buying business's out and liquidating?

    Sounds like something like this was gauranteed to happen.

    I would suggest getting an accountant now rather than making yet another huge mistake and asking a load of (all be it very knowledgeable) randoms on a public forum. Sounds more like you need some damage control in the form of advice from someone that really cares (and I don't mean that vindictively!!)

    I would happily pass this over to an accountant to see if they can sort it - but again I don't want them to come back with a bill for thousands!
    You can't avoid an accountant just because he is going to tell you what you need to pay to avoid jail. If you owe it you gotta pay it.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

    Comment


      #3
      Originally posted by soul_trader View Post
      Hello,

      I wonder if anyone could possibly advise me on my situation below and suggest some good next steps for a bit of a PAYE pickle I have found myself in. At least, I think it's a pickle - it might not be a problem at all.

      I am the sole director of a LTD company that was incorporated in June this year. Previously, I was a sole-trader, but I registered as a LTD for liability purposes once my workload began to increase. As well as my work for the LTD, I also work as a self-employed contractor for other companies in a completely unrelated industry.

      The business, however, is still very small and has a modest turnover of around £30k - my annual income after expenses is roughly £15 - £18k.

      I am liquidating the business at the end of December as I'm being 'bought out' by another company - so, good news!

      However, I should pre-face the following by warning that I'm not very good at managing accounts, so I've got myself into a situation which I don't actually know whether it's good, bad or whether I need to do something to correct it.

      When I incorporated the business, I did not register for PAYE at the time. Instead, when I needed to pay myself, what I did was simply transfer money from the LTD account to my personal account. My expectation throughout was that I would then complete my self-assessment as normal and pay the tax/NI as due on this.

      Reading through some of the literature online, I now think that this is not an acceptable way to manage my accounts and may actually break several rules regarding PAYE. I didn't realise I was actually doing anything wrong.

      What I want to know is what I should do now to ensure that I'm completely above-board and to make sure I pay any monies that I might owe to HMRC? As indicated previously, I never intended to avoid any payments - I just didn't realise that this wasn't an acceptable way to pay myself.

      I didn't want to salary myself on PAYE as my income fluctuates so much - and also because my turnover is so small it didn't make sense to invest significant amounts of time and energy into a PAYE system when I am the only person involved with the business.

      So, what should I do?

      Should I call HMRC and be honest and say I think I've messed up - and how can I remedy this and ensure I've paid everything I need to? Are they likely to be sympathetic or could I be fined? It was an honest mistake and I don't really want to be fined given my income is so low.

      Is there a way of retrospectively giving legitimacy to my payments to myself? I have paid myself about 15 times since incorporation - can I go back and issue dividend certificates for each of these transfers? Or is it not possible to issue dividends without also having PAYE?

      What should I do to make sure I'm not breaking any rules?

      Alternatively, I've read about the concept of a Director's Loan Account. Could I class these payments from the LTD to me as part of the DLA and then 'write these off' (as per http://www.hmrc.gov.uk/paye/exb/a-z/...t-director.htm) and register for PAYE and pay NI/tax on this in that way instead?

      Once again, I really didn't mean to manage my accounts this way - I just didn't realise it was not the correct way to do things and I've always been used to doing things like a 'self-employed' person. I would happily pass this over to an accountant to see if they can sort it - but again I don't want them to come back with a bill for thousands!

      Any help would be gratefully received - as far as I can see there are several ways of doing things, but I want to make sure I correct any errors I've made and do things the 'proper way' from now on.

      Thank you.
      Stop being a cheapskate. You're clearly bringing in enough money through your companies to employ an accountant.
      I couldn't give two fornicators! Yes, really!

      Comment


        #4
        Hi BolshieBastard,

        My business is very small - and I'm now buying anyone out - I'm being bought of myself!

        My business was always just a very small part-time job that brought in a few grand alongside my main job each year, but in June I decided to leave my day job and devote more time to this.

        I do have an accountant, but they haven't needed to do anything yet. I'm happy to pay them - and as indicated, happy to pay everything I owe - but I just wanted some (friendly) advice here as to whether I actually owe anything at all as the literature is hugely conflicting and if I ask my accountant it'll cost me whereas I could get some useful advice here first (for free).

        I'm not trying to be a cheapskate!

        Comment


          #5
          I didn't expect such abuse!

          I don't have multiple companies. I'm just a one-man band. I'm earning about £15k a year profits - and I have an accountant. I'm just asking for some advice as £15k isn't a huge income by any stretch of the imagination.

          Judging my some of your responses you think I run several companies. I don't. It's just me.

          Another company wants me to work for them and so I am merging my business into their's and becoming an employee. That's all.

          I just made a very innocent and silly mistake by acting like a self-employed person, so wanted some useful advice as to how to correct this.

          What's wrong with that - I've put my hand up and want to correct my error?

          Comment


            #6
            WTS about accountants. But as long as it was out of profit you can probably class it as a director's loan and then pay that off with a dividend. You could also create some backdated dividend declarations for when you made payments: not strictly speaking legal, but nobody will ever know. You don't need to register for PAYE, though it's usually more tax efficient to do so.
            Will work inside IR35. Or for food.

            Comment


              #7
              Are you absolutely sure you didn't invoice the company for these amounts as work performed as a sole trader outside your activities within the company as a director.

              If this were the case then there is no paye etc from the limited and it just so happens your SE earnings increased. Of course none of this help with the accounts for the LTD - but if you are being as you put it "bought out" then you are just selling your shares on effectively and resigning as a director. I'm sure they have done their due diligence as to the state of the accounts and are happy.

              I would imagine the invoices from you as SE are stuck in the back of the same filinig cabinet as those related to dividends.

              Divis will be more tax efficient, but to be frank from your post (sorry) but the chance of getting everything exactly right don't look too promising.

              Comment


                #8
                Hi Soul Trader

                I'm an accountant and happy to talk through your options with you. No fee. PM me if you want my contact details.

                Regards

                Joel

                Comment


                  #9
                  Originally posted by THEPUMA View Post
                  PM me if you want my contact details.
                  Soul_Trader is too newbie to be allowed to send PMs.
                  My all-time favourite Dilbert cartoon, this is: BTW, a Dumpster is a brand of skip, I think.

                  Comment


                    #10
                    Originally posted by RichardCranium View Post
                    Soul_Trader is too newbie to be allowed to send PMs.
                    Good point. It's hardly a trade secret though. Not sure why I was playing so hard to get. My DD phone number is 01923 809414.

                    Comment

                    Working...
                    X