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Post Info TOPIC: Two questions on incorporation........


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Two questions on incorporation........


LATE INCORPORATION - When incorporation is late - for example client though someone had incorporated for him from Aril 2016.....but hadn't!! If they were to do this now (retrospectively) would there be any penalty?? The incorporation would allow them to file accounts pay tax on time. How late can one be??

 

ALLOCATING SPOUSE SHARES - There had been a lot of discussion on the 'Gifting' of shares (or simply makings one's spouse a shareholder) I am not exactly sure where the latest legislation sits. If the estimated dividends were approximately £30k, the director of a company is thinking of setting up with 5 shares for him and 1 share for his wife. So this would neatly fit in to the £5k threshold for his wife. I think this is ok as it is allowed - or was allowed - or rather not allowed and then protected as being allowed?????!

 

 

 

 



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Hi Richard

Assuming they can incorporate retrospectively (I'm not at all sure they can) then there would be no filing penalties providing you submit accounts before 31st December.

Again assuming they can incorporate retrospectively then they simply register the shares you have indicated BUT they wouldn't have been able to do this after the event under normal circumstances. The accounts would have been to 31st March so so the dividends would apply to that period.

I'm assuming this non Ltd Company doesn't have it's own bank account?



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Hi Richard

Not really sure what you mean by late incorporation, the Company has either been registered and exists or if not registered then it does not, why has it took so long to realise that they have not been incorporated and have they been trading as if they were?

What was the status of the business before?  

Is the 2nd question related to the 1st?

 



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Yes the two questions relate to the same one! No bank account exists for what was thought if as the limited company.

It is a bit of a mess and although the dividend allowance has been squeezed, it still would make a bit of a difference to the tax payable.

I expect that dividends cannot be declared...or at least calculated....until the accounts are finalised. So hopefully this won't be a problem.



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Oh....meant to say....Sole Trader before.



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Ok - so it seems you are either incorporated or you are not........and there is NO WAY of retrospectively incorporating. That is to say, if a company was incorporated today, there is no way of filing Limited Company accounts for the period April 2016 to March 2017!

It seems quite obvious, but quite annoying all the same I expect to someone who thought it was taken care of. This is a company that doesn't raise invoices so didn't have to consider the format and the mention of Ltd status.

So the next question is really how to set up the company in the most tax efficient way. Or the way that gives the most breathing space in terms of time before paying any tax due?? What accounting reference dates to use given that there will be a period (April 2017 to November 2017) where the entity is still a sole trader. I understand that the reference date can be extended to 18 months, but what would be the scenario if for example the reference date was extended to March 31 2019.......so from pretty much todays date in November 2017?

I understand that there would have to be self assessment returns for 2016-2017 and 2017-2018 (to November 2017)...........but what about the Ltd Co. accounts? Also, what happens with the dividends for the period Nov 2017 - March 2018. Given that the self assessment form is due in January 2019?? How can these be worked out? 



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Count1314 wrote:

Oh....meant to say....Sole Trader before.


 Confused. Where was the 'sole trader'' meant to be included?



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Artois asked the status of the business before.

I missed this and added answer following previous answer to another Q asked by Artois.



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Ah right - maybe shouldve read the posts properly.

Artois is Doug by the way



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Count1314 wrote:

Ok - so it seems you are either incorporated or you are not........and there is NO WAY of retrospectively incorporating. That is to say, if a company was incorporated today, there is no way of filing Limited Company accounts for the period April 2016 to March 2017!

It seems quite obvious, but quite annoying all the same I expect to someone who thought it was taken care of. This is a company that doesn't raise invoices so didn't have to consider the format and the mention of Ltd status.

So the next question is really how to set up the company in the most tax efficient way. Or the way that gives the most breathing space in terms of time before paying any tax due?? What accounting reference dates to use given that there will be a period (April 2017 to November 2017) where the entity is still a sole trader. I understand that the reference date can be extended to 18 months, but what would be the scenario if for example the reference date was extended to March 31 2019.......so from pretty much todays date in November 2017?

I understand that there would have to be self assessment returns for 2016-2017 and 2017-2018 (to November 2017)...........but what about the Ltd Co. accounts? Also, what happens with the dividends for the period Nov 2017 - March 2018. Given that the self assessment form is due in January 2019?? How can these be worked out? 


 Hi Richard

He doesnt issue invoices - so a question - on what basis does he collect his 'income'/turnover?



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Joanne  McCormick

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Hi Richard, as I thought re incorporation but wasn't 100% certain.

You've no choice but to continue to treat him as a sole trader for the period from April to date.

Up to you when yo determine year end for the new Ltd Co, and it can be extended to 18 months, but bear in mind the CT600 can only be 12 months maximum, so first one would still need to be submitted within a year of November 2019, with any tax due paid 3 months earlier.  If it were me I'd be incorporating today and changing year end to 31st October 2018, but much would depend on your client's circumstances.  Only you can determine that.

Oh, and I would strongly suggest you advise the client has a business bank account in place, it's just too messy if they're whacking stuff through their personal account

Dividends can be taken once it is known what the post tax profit is, but can be extracted throughout the year if there's a solid assumption that the profit will be there.  For instance a client of mine took two lots of dividends before the year end but was sure that he had the profits available.

Nothing can be done about the dividends he thought he had unfortunately, how did he think the Ltd Co was in place?  At the very least, in his shoes I would be wanting to see proof of it being in place.  Was he charged for the incorporation? I would also be seeking redress from the person concerned if so.  



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Richard
A few very random thoughts/things to consider, in addition to John's:-

  • You cannot re-write history and retrospectively create a Limited, but even had you done so you could not have re-written the shareholding history nor the lack of a board meeting to agree a dividend. 
  • Be careful of clients who apportion blame on others - they are the type who will easily do the same to you.    Does this muppet really think JUST incorporating is the only thing he has to do between setting up and doing his accounts? How did he even know (without incorporating) that his chosen business name was going to be accepted by Co House.  Where are his statutory documents?
  • Despite not issuing invoices he still has a fiduciary care to his customers and suppliers and MUST mention he is Limited on anything that has his business name on it (along with a few other details legally), which includes any website, till receipts, businesscards, credit applications, bank accounts etc etc. So he does have to consider the 'format and mention' of the business. To purport to be limited when he is not is a matter is legally a misrepresentation under the Fraud Act and the penalties can be severe (10 years imprisonment and/or an unlimited fine if I recall correctly!) for one and a chage of fraudulent trading for another
  • Why the March year end for the Limited?
  • What about basis periods for his sole trader (other....hint) existing business and impact on tax at cessation
  • How will you transfer the assets, liabs etc into the Limited and at what value
  • HMRC clearance on valuation of goodwill
  • Limited needs its own Bank account
  • No mention of classes of shares in first post.
  • Only considering share split for a one year £5k divi allowance on the part of your client is a bit naive and short sighted.
  • Shareholders agreement.
  • Can only advise the best way forward with full information which we do not have. Im afraid only you can crunch those numbers.
  • Moving staff under TUPE
  • Cap allowances - care re connected parties.
  • VAT reg?!

Probably can think of a few other things, but just not right now.



-- Edited by Cheshire on Monday 6th of November 2017 12:43:30 PM

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Joanne  McCormick

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Thanks John - and to Cheshire for the list of thoughts!

I am curious (and they may well be related), but I will need to look into the hint that Cheshire gave on basis periods and tax at cessation....I expect this will be overlap relief?? Also, not sure why John would do it now and choose end October as year end??

It is a shame this hasn't came up in September as the sole trader accounting period could have been extended to end September (18 Months) and then a clean break and start of Ltd Co from October. As mentioned though, I will have to look into all this as it is new to me and the above may well be a wrong approach.

Basically the tax payable is pretty fixed and the profit around 30k. Hence the thought that 1/5th of shares to spouse would be good to cover £5k. Apparently this coming period is proving difficult tax payment-wise, so looking for the best way or the way that puts it back as far as possible.  Will be incorporating them asap. No assets to speak of other than customer base....but not sure this would be allowed for an owner managed Ltd Co.



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Count1314 wrote:

Also, not sure why John would do it now and choose end October as year end??

It is a shame this hasn't came up in September as the sole trader accounting period could have been extended to end September (18 Months) and then a clean break and start of Ltd Co from October.


I was thinking merely in terms of running the Ltd Co for a full year. It doesn't really matter when you start it, could be 1st December to 30th November.   Reason I said to end of October (if doing it now) is because otherwise you end up with a near 13 month accounting period, which means two CT600's.

 



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Hi Richard

Yes sadly Artois is only my stage name the same as Cheshire is for Joanne

I was going to reply earlier but John and Joanne seem to have covered everything and in a lot more detail than I would have, giving you and your client plenty to ponder.

As I am sure you are aware the 2016/17 sole trader accounts still need to be filed by Jan 2018 as well as paying any tax due and POA.

Just curious but if your client did think that they were trading as a Ltd Co how have they been taking any wages/salary out? Also they would still have to pay Corporation Tax on the 30K before any dividends were allocated which is not to different from what he will pay as a sole trader.

 

 



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Hi Richard
My hint wasnt the basis periods ( I just threw that in for good measure), but in relation to the sole trader, as in does it need to be?

Im unsure why September (18mths) is such a biggie - any particular reason?

Also, just given some of your ponderings - do you have the formation agent status and also sufficient PII cover and knowledge to undertake the interactions with Companies House, Limited Accounts and CTs?

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Artois wrote:

 

Hi Richard

Yes sadly Artois is only my stage name the same as Cheshire is for Joanne

I was going to reply earlier but John and Joanne seem to have covered everything and in a lot more detail than I would have, giving you and your client plenty to ponder.

As I am sure you are aware the 2016/17 sole trader accounts still need to be filed by Jan 2018 as well as paying any tax due and POA.

Just curious but if your client did think that they were trading as a Ltd Co how have they been taking any wages/salary out? Also they would still have to pay Corporation Tax on the 30K before any dividends were allocated which is not to different from what he will pay as a sole trader.

 

 


 Oh dont let us stop you Doug!!!!!  Its better to have more info to see if we are all on the same wavelength.  Or so we can have a debate, not had one of those recently unless its been with the spammers



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As I understand it, he was taking payments considered to be the minimum salary for tax purposes and the balance to be declared as dividends.

So, although you mention POA which I think should be reduced to zero in any case if incorporating in future period, there would be a big difference considering this salary reducing the taxable profit and there being zero national insurance to pay.....I suppose that is the advice he was given.

Now he will find himself paying at least a couple of thousand more I think - and that is ignoring any POA!!

Thanks for your input Doug!

 



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Count1314 wrote:

As I understand it, he was taking payments considered to be the minimum salary for tax purposes and the balance to be declared as dividends.

So, although you mention POA which I think should be reduced to zero in any case if incorporating in future period, there would be a big difference considering this salary reducing the taxable profit and there being zero national insurance to pay.....I suppose that is the advice he was given.

Now he will find himself paying at least a couple of thousand more I think - and that is ignoring any POA!!

Thanks for your input Doug!

 


 BUT he couldnt have claimed the payroll for himself anyway even if he HAD the Limited set up - as he wasnt running PAYE was he?! 

 So the guy has either taken advice and ignored it (including setting up a PAYE scheme) or has left it and now whinging about his lot in life. He cannot re-write that history neither. 

He needs to read up on his responsibilities.



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Joanne  McCormick

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OK, quick back of envelope stuff 

Ltd Co Profit 30k tax 6k Profit 24k

dividend tax on 16k  @ 7.5% £1200 so net benefit 30.8k including wages

 

Sole Trader profit £38k tax and NI £8.1k nett benefit 29.9k 

 

That's £900 better off as a Ltd Co but with increased responsibilities and higher accountancy fees.



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Count1314 wrote:

As I understand it, he was taking payments considered to be the minimum salary for tax purposes and the balance to be declared as dividends.

So, although you mention POA which I think should be reduced to zero in any case if incorporating in future period, there would be a big difference considering this salary reducing the taxable profit and there being zero national insurance to pay.....I suppose that is the advice he was given.

Now he will find himself paying at least a couple of thousand more I think - and that is ignoring any POA!!

Thanks for your input Doug!

 


 

Hi Richard

I mentioned POA because your client will still have to file a SATR 2017/18 for trading as a sole trader between April 2017 and whenever incorporation takes place.

 



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Artois wrote:

Just curious but if your client did think that they were trading as a Ltd Co how have they been taking any wages/salary out? Also they would still have to pay Corporation Tax on the 30K before any dividends were allocated which is not to different from what he will pay as a sole trader. 


 Did not have time to respond properly yesterday as much to busy cooking

I just want to clarify that when I said there would not be a lot of difference between the tax paid as a sole trader and corporation tax the salary your client had taken was not known, it was only after I had asked the question that you said about it, so at the time what I said was correct!

 



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Would he need to set up a PAYE scheme if he was the only employee and paying himself below the PAYE/NIC thresholds?



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Count1314 wrote:

Would he need to set up a PAYE scheme if he was the only employee and paying himself below the PAYE/NIC thresholds?


 What are the full rules for non reporting?

which nic threshold do you mean and is that the optimum salary?

 



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Cheshire wrote:

Hi Richard
My hint wasnt the basis periods ( I just threw that in for good measure), but in relation to the sole trader, as in does it need to be?

Im unsure why September (18mths) is such a biggie - any particular reason?

Also, just given some of your ponderings - do you have the formation agent status and also sufficient PII cover and knowledge to undertake the interactions with Companies House, Limited Accounts and CTs?


 Sorry - not sure what you mean by does it need to be??



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Cheshire wrote:
Count1314 wrote:

Would he need to set up a PAYE scheme if he was the only employee and paying himself below the PAYE/NIC thresholds?


 What are the full rules for non reporting?

which nic threshold do you mean and is that the optimum salary?

 


The primary threshold I expect and the threshold below which I believe he didn't expect to set up a PAYE scheme.

Sorry - "What are the full rules".......what are you asking??



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Leger wrote:

OK, quick back of envelope stuff 

Ltd Co Profit 30k tax 6k Profit 24k

dividend tax on 16k  @ 7.5% £1200 so net benefit 30.8k including wages

 

Sole Trader profit £38k tax and NI £8.1k nett benefit 29.9k 

 

That's £900 better off as a Ltd Co but with increased responsibilities and higher accountancy fees.


 Yes - pretty much as I see it. Still a decent saving and perhaps also a saving on POA. Simple affairs too for accounting so probably not much in additional fees.



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Count1314 wrote:
Cheshire wrote:
Count1314 wrote:

Would he need to set up a PAYE scheme if he was the only employee and paying himself below the PAYE/NIC thresholds?


 What are the full rules for non reporting?

which nic threshold do you mean and is that the optimum salary?

 


The primary threshold I expect and the threshold below which I believe he didn't expect to set up a PAYE scheme.

Sorry - "What are the full rules".......what are you asking??


 Ok  try this another way - what exactly has he drawn out each week/month that he puports to be wages from the sole trader/he though limited company?

The full rules - I mean what are the HMRC rules for non reporting staff when there is no formally registered PAYE system in place?   It isnt just a case of being below a certain threshold.

 



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Joanne  McCormick

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And if there are no other staff and you are below the PAYE threshold??



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Count1314 wrote:

And if there are no other staff and you are below the PAYE threshold??


 It's pretty much irrelevant because your client was classed as a sole trader.  But you haven't answered Joanne's questions.  Are you aware of the rules regarding non declaration?  Just because he might have been below the LEL does not always imply that a PAYE didn't have to be in operation.  What salary did he actually withdraw?  Earlier you suggested the optimum salary/dividend split, which peeps generally understand to be £8112 salary (not always the case mind) 

What's important now is that you prepare sole trader accounts for the period April 2016 - March 2017, determine the tax liability plus a calculated guess on what you think the tax liability will be for the period April 2017 to when he goes Ltd, and apply a reduced rate to POA if necessary.  My advice is to be careful with this, as HMRC can penalise your client if it's inaccurate. 

Then decide the cut off date for the sole trader status and prepare sole trader accounts to that date.  (You won't be able to submit them until 6th April 2018, but you will at least know the tax liability due.  

Then he can begin his Ltd Co, and preferably decide shareholder allocation at the start of the business, and not when he thinks he needs to reduce his own tax liability (which he couldn't have done anyway)

Go back to Joanne's list of bullet points, are you comfortable with dealing with the changeover from sole trader to Ltd Co?  If you are the jobs a good 'un

 

 



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Hi
There have been a couple of unanswered questions and given the apparent lack of knowledge round eg how to work out dividends for the split tax years (quote ''Also, what happens with the dividends for the period Nov 2017 - March 2018. Given that the self assessment form is due in January 2019?? How can these be worked out?'') and eg requirements for running a payroll scheme (quote ''no other staff and you are below the PAYE threshold'' ) I would, with respect, suggest Richard you hand this one off to someone else once you have done the sole trader part. Although I could be mis-interpreting your posts.

There is no such thing as below the PAYE threshold. There are rules for when you do not need to run such but they extend beyond what you are considering. You need to do some reading up methinks.

I think it is only John who mentioned the salary at £8k, which is why I have tried to ascertain what the salary this guy THINKS he has withdrawn to see if it fits in to any kind of equation in the should it be or shouldnt it be a Limited /sole trader/partnership and therefore how much he is actually losing by some supposed cock-up at the start by someone.

At £8112 you have to run RTI, so you could not have claimed that much in wages without doing so - or you could try to restrospectively set up the payroll and RTI it all and pay a bit fat fine by trying to re-write that history.

If the payroll is below the lower LEL and this scenario fits ALL the other requirements for a non RTI payroll, which I would doubt anyway, then you could potentially have claimed the wages but only if, once those other rules were met, then the guy had taken the exact amount below the LEL out each month or week. If he had taken a pound more then it could be construed by HMRC that ALL withdrawals he made were salary, including his supposed divis as (as has been said several times) you cannot re-write history. Then he would get a bit fat fine and a nice tax and NI bill for his trouble. Never mind the fact that, had he been allowed the lower LEL, he would lose his pension benefit for the year so may well be suing your ass for bad advice.

Anyway, as thats a mute point, the point I was trying to make was that he could NOT rely on taking ANY wages HAD he been a limited anyway - because he didnt run a proper RTI PAYE scheme and from the non answer of my Q I think its clear he hasnt taken the lower LEL amount out neither. So his tax bill difference is not as great as you think, because you cannot include the wages in the CT comparison!!!!!!

Plus the POA should be dis-regarded as any extra ones are just cashflow items and nothing more.

The guy has messed up big time, so he is now paying the price. Maybe this will teach him a lesson.

Has he actually registered to complete a self assessment return? May well have some £ to make for not doing so.

Dont forget to get your goodwill clearance, along with the rest that John has mentioned.




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Joanne  McCormick

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Cheshire wrote:

Hi
There have been a couple of unanswered questions and given the apparent lack of knowledge round eg how to work out dividends for the split tax years (quote ''Also, what happens with the dividends for the period Nov 2017 - March 2018. Given that the self assessment form is due in January 2019?? How can these be worked out?'') and eg requirements for running a payroll scheme (quote ''no other staff and you are below the PAYE threshold'' ) I would, with respect, suggest Richard you hand this one off to someone else once you have done the sole trader part. Although I could be mis-interpreting your posts.

There is no such thing as below the PAYE threshold. There are rules for when you do not need to run such but they extend beyond what you are considering. You need to do some reading up methinks.

I think it is only John who mentioned the salary at £8k, which is why I have tried to ascertain what the salary this guy THINKS he has withdrawn to see if it fits in to any kind of equation in the should it be or shouldnt it be a Limited /sole trader/partnership and therefore how much he is actually losing by some supposed cock-up at the start by someone.

At £8112 you have to run RTI, so you could not have claimed that much in wages without doing so - or you could try to restrospectively set up the payroll and RTI it all and pay a bit fat fine by trying to re-write that history.

If the payroll is below the lower LEL and this scenario fits ALL the other requirements for a non RTI payroll, which I would doubt anyway, then you could potentially have claimed the wages but only if, once those other rules were met, then the guy had taken the exact amount below the LEL out each month or week. If he had taken a pound more then it could be construed by HMRC that ALL withdrawals he made were salary, including his supposed divis as (as has been said several times) you cannot re-write history. Then he would get a bit fat fine and a nice tax and NI bill for his trouble. Never mind the fact that, had he been allowed the lower LEL, he would lose his pension benefit for the year so may well be suing your ass for bad advice.

Anyway, as thats a mute point, the point I was trying to make was that he could NOT rely on taking ANY wages HAD he been a limited anyway - because he didnt run a proper RTI PAYE scheme and from the non answer of my Q I think its clear he hasnt taken the lower LEL amount out neither. So his tax bill difference is not as great as you think, because you cannot include the wages in the CT comparison!!!!!!

Plus the POA should be dis-regarded as any extra ones are just cashflow items and nothing more.

The guy has messed up big time, so he is now paying the price. Maybe this will teach him a lesson.

Has he actually registered to complete a self assessment return? May well have some £ to make for not doing so.

Dont forget to get your goodwill clearance, along with the rest that John has mentioned.



 Thanks again Joanne....I re-read my posts and have failed in the English department in some areas. As for the last post, as I understand it, if there is one director who is paid below the LEL for NIC with no other employees....then there is no requirement to run a PAYE scheme. I understand the points about payment frequency and this is interesting as the interpretation of what the payments really are could be viewed differently by HMRC. But then again, before RTI, the whole system was unknown to HMRC until the annual returns were filed. I actually think this person was told that he only need be paying himself below the primary threshold for NIC before needing to set up a scheme....as the sole employee/director. So perhaps it is a good thing the company wasn't incorporated. At this level (say £8,060 p.a.), he wouldn't be paying PAYE OR NIC but would have to set up a scheme. I haven't come across any companies that had to do this retrospectively but imagine as you say would pay a big fat fine. However, no idea what this would have been in this scenario given that there was no liability.....just imagine that the £8,060 was the ONLY payments taken throughout the year. The fact that he didn't set up a scheme would surely be a slap on the wrists if he was declaring the income via self-assessment?? Knowing what HMRC are like however.....on second thoughts, a big fat fine sounds more realistic! : )

I think the comment on POA being nothing more than just cash flow items would send this guy over the edge I think form what I have been told about his current cash position! 

 



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Count1314 wrote:

I think the comment on POA being nothing more than just cash flow items would send this guy over the edge I think form what I have been told about his current cash position! 


Oh dear, did he spend the dividend money that hadn't yet been allocated?

 

You still need to read the rules on registering for PAYE, there are circumstances where, even below the LEL, your client might have had to set up a PAYE scheme.



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Oops, my thoughts exactly John!     no    

He has had the cash and spent the cash......

I dont think he should be let loose as a Limited!  Dont envy you that one!!!!

Hope you are getting a bit fat piece of wonga out of this for sorting this pile of tripe out for him!



-- Edited by Cheshire on Tuesday 7th of November 2017 03:20:19 PM

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Thanks again....yes I am fairly sure I understand them....regarding other employment/pensions etc. It seems that in normal circumstances, where there are none of these, then it is straight forward.

What seems to be a grey area....possibly not....is how best to record/document the payments if the 'salary' and dividends are paid regularly and for a steady amount. Or, if the salary is simply declared at the year end and not effectively paid......that is posted v DLA. Not so difficult when a PAYE scheme is in place and annual dividends declared.  

This all started out asking about something that had never come up before.......retrospective incorporation.....as it doesn't exist!! I'm afraid I was scrambling around looking for a solution 'out loud'! biggrin

If this email threads has taught me one thing (I am more a humble management accountant), then it is the importance of being firm with clients wrt payments of directors salaries/dividends and the documentation that goes with it!! Thanks!!



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Count1314 wrote:

This all started out asking about something that had never come up before.......retrospective incorporation.....as it doesn't exist!! I'm afraid I was scrambling around looking for a solution 'out loud'! biggrin


 Hi all, I go out for the day and come back to find that you have all been playing without me, that's not fair.

Hi Richard, if you go back to my first reply to your OP I did say that if the Company was not registered then it does not exist, but it has been a good thread to follow and take part in, I just hope you can beat some sense into your client before you get the LTD up and running

 

 

 



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Count1314 wrote:

Thanks again....yes I am fairly sure I understand them....regarding other employment/pensions etc. It seems that in normal circumstances, where there are none of these, then it is straight forward.

What seems to be a grey area....possibly not....is how best to record/document the payments if the 'salary' and dividends are paid regularly and for a steady amount. Or, if the salary is simply declared at the year end and not effectively paid......that is posted v DLA. Not so difficult when a PAYE scheme is in place and annual dividends declared.  

This all started out asking about something that had never come up before.......retrospective incorporation.....as it doesn't exist!! I'm afraid I was scrambling around looking for a solution 'out loud'! biggrin

If this email threads has taught me one thing (I am more a humble management accountant), then it is the importance of being firm with clients wrt payments of directors salaries/dividends and the documentation that goes with it!! Thanks!!


Not so grey area. Board minute to pay Director £x.  Run a payroll - it costs nothing.  Then transfer the exact amounts - harder to dispute.    Dont declare a salary at year end.  (Can you recall John - would this kick in a big NI bill even on the Director NI scheme?) DLA'ing it doesnt mean its happened the way you want it to.

Dividends - defo not a grey area.  Do not let said Shareholder/Director just take cash when he feels like it, as John mentioned above a few posts back. The money is not his, it belongs to the Limited company.    If he wants interim dividends throughout the year then he has to calculate as precisely as possible,including deducting any disallowables, he profit he has made so far, deduct a chunk for CT and then draw (but make it less than he thinks), but key to that as well is Board meeting and minutes BEFORE THE EVENT and divi vouchers (even though there is nil tax).   

Care re rules round overdrawn Directors loans, the limits and the tax he will need to pay.  It is HIS responsbility to understand these rules but its yours to make sure he doesnt go and play with the knives (as Shaun would say!)

Been an interesting one Richard. Nice to have a lengthy meaty post!!!!!!



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Artois wrote:
Count1314 wrote:

This all started out asking about something that had never come up before.......retrospective incorporation.....as it doesn't exist!! I'm afraid I was scrambling around looking for a solution 'out loud'! biggrin


 Hi all, I go out for the day and come back to find that you have all been playing without me, that's not fair.

Hi Richard, if you go back to my first reply to your OP I did say that if the Company was not registered then it does not exist, but it has been a good thread to follow and take part in, I just hope you can beat some sense into your client before you get the LTD up and running

 

 

 


 Skivving again Doug?!!!  wink  Did you have a lovely day?

I have a big stick if Richard needs it.   But not like that one used in the Walking Dead - I think Shaun has that one!



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Joanne  McCormick

Fallows  Hall  Ltd

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Cheshire wrote:


 


Skivving again Doug?!!!  wink  Did you have a lovely day?

I have a big stick if Richard needs it.   But not like that one used in the Walking Dead - I think Shaun has that one!


 Hi Joanne, yes I did have a lovely day thank you for asking and it included a couple of beers which always helps.



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Artois wrote:
Count1314 wrote:

This all started out asking about something that had never come up before.......retrospective incorporation.....as it doesn't exist!! I'm afraid I was scrambling around looking for a solution 'out loud'! biggrin


 Hi all, I go out for the day and come back to find that you have all been playing without me, that's not fair.

Hi Richard, if you go back to my first reply to your OP I did say that if the Company was not registered then it does not exist, but it has been a good thread to follow and take part in, I just hope you can beat some sense into your client before you get the LTD up and running

 

 

 


 Yes Doug I did note that you had said that back then.

Thanks to all of you for your input!!

Richard



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Cheshire wrote:
 Dont declare a salary at year end.  (Can you recall John - would this kick in a big NI bill even on the Director NI scheme?) 

 

Hiya

You can register an annual scheme, and just pay once a year.  You could even just pay at year end the £8112 or whatever, providing you've filed a NIL FPS every month before doing the final one.  It won't kick in a big bill if they are on the Directors NI scheme, because the NI is calculated on the total yearly salary, rather than cumulatively as under the standard scheme.

Personally though, I would prefer to run it monthly.

 

Richard, I think I may have misunderstood, are you doing the accounts for this guy or were you just assisting him with the questions you asked in the beginning? I think we've all assumed the former.

However, its been a really good discussion, even if we did bombard you with heaps of questions and information you probably weren't expecting.



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Hi John
I had forgotten about the annual scheme - its that long since Ive used it. Thanks re the paying at the end info. I knew there was something odd about it - I wouldnt see the point in filing a nil FPS and that probably why most folk tend to do the split of the wage per month and allow some drawings as you go. Thanks for the update.

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Joanne  McCormick

Fallows  Hall  Ltd

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Leger wrote:
Cheshire wrote:
 Dont declare a salary at year end.  (Can you recall John - would this kick in a big NI bill even on the Director NI scheme?) 

 

Hiya

You can register an annual scheme, and just pay once a year.  You could even just pay at year end the £8112 or whatever, providing you've filed a NIL FPS every month before doing the final one.  It won't kick in a big bill if they are on the Directors NI scheme, because the NI is calculated on the total yearly salary, rather than cumulatively as under the standard scheme.

Personally though, I would prefer to run it monthly.

 

Richard, I think I may have misunderstood, are you doing the accounts for this guy or were you just assisting him with the questions you asked in the beginning? I think we've all assumed the former.

However, its been a really good discussion, even if we did bombard you with heaps of questions and information you probably weren't expecting.


 Hi John

I am in between the former and the latter!! I am assisting with questions with a view to taking it on for him. The original Q on retrospective incorporation was new to me as it doesn't exist......the 18 month final year for sole trader accounts comment was so that it would fit neatly with the commencement of the Ltd accounts - had he managed to incorporate back then.....but naively thinking somehow that it would give him some breathing space for payment of SA tax. I mentioned cash was an issue!! I understand that he will have to file SA in January 18, same again (for year to end November say) in January 19 and Ltd Co accounts 21 months after registration. 

Last question on this - since he will probably incorporate later in the month and most of the work for which he receives payment for (at the end of the month) will have been done as a sole trader, I expect it is reasonable to say that trading commenced December 1st? So no need to file tax return other than for the first full trading period.....first years accounts?? This is much to do with the reality as it is simplifying matters for filing. 

Thanks

Richard

 

 



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Count1314 wrote:
Last question on this - since he will probably incorporate later in the month and most of the work for which he receives payment for (at the end of the month) will have been done as a sole trader, I expect it is reasonable to say that trading commenced December 1st? So no need to file tax return other than for the first full trading period.....first years accounts?? This is much to do with the reality as it is simplifying matters for filing. 

Thanks

Richard


Hi Richard

Yes, that makes sense.  All you need to do, once the Company is set up and you are the agent, is to notify HMRC that trading has commenced on 1st December.  Your first accounts period will then be 1st December 2017 - 30th November 2018.  Just one anomaly to watch out for though, is that for the first year only Co House will expect a filing no later that matches the incorporation date  (eg incorporate 22nd November it would be 22nd August 2019.



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