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Can of worms


Just started in a new job as a part time book-keeper in a small company, with only 2 directors and the job is most certainly a "challenge".  I'm playing catch up and have dealt with the VAT, but the Directors have been taking monthly drawings out the company, but not reporting any salary etc. to PAYE.  Their year end is long since past and the deadline for submission to Companies House is fast approaching, but nothing has been done!

Any advice out there on how to deal with this situation would be very much appreciated!!


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31st Jan 2012 20:41


Presumably the 'drawings' have been debited to directors' loan accounts which are now overdrawn.

It might be possible to put those accounts back into credit by declaring a dividend or putting a bonus through PAYE now.  If it is not yet nine months after the year end there may be no liability for 's419 ICTA 1988 tax' (now renumbered!).  However there may still be a benefit in kind issue in relation to an interest free loan.

So perhaps not as bad a situation as it appears at first sight.


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31st Jan 2012 22:03

Thanks David.

At the moment there are literally no transactions on the ledger!  I'm starting through the bank recs to get all the transactions onto the system. (Quite liking "Quickbooks" I have to say!)

My initial thoughts were to process the drawings as directors loans, but beyond that I wasn't sure on how to tidy it all up.

This level of disorganisation is totally foreign to me....

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31st Jan 2012 22:08


Loads of small companies do the same thing. Have they got accountants that do the year end statutory accounts? If so they will be probably be the ones that deal with this.

s419 now referred to as s455 if that helps!

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31st Jan 2012 22:37

If only!!

The deadline for the statutory accounts is 4 weeks away....and no, there is no Accountant on the scene! (I am going to have to work on that and help them along the road to getting an Accountant on board - and fast!).

They've had some really bad experiences in the past with Accountants and they seem to think that a good book-keeper, that they can trust, will see them through, but I don't think they fully appreciate what a tangled web they have weaved themselves into! 

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Just do what you can

All you can do is prepare the basic accounts for last year asap and, as mentioned above, unless described as something else and backed up with evidence, put all directors' drawings to loan accounts (one each).

Whilst as David suggests it might normally be advisable in such a situation to put through a dividend now (Dr Dividends & Cr Directors' loans) before the end of February (with the proper paperwork in place) to avoid the S455 liability, you are in a Catch 22 because without up to date accounts the directors are not in a position to judge whether a dividend is legal and so you/they could be making things worse.  Also, you (& they) presumably haven't much idea of personal tax status which again has a bearing on the sum & timings of dividends.

Same goes for a salary bonus, only worse because of the potential PAYE liabilities attaching to it.

So, concentrate on getting the books up to date and find a local accountant to take it on when the figures are done.  If it were me, I'd advise them that it would be dangerous to rush things and so the time limit would almost certainly not be met, but let's face it being a few weeks late and getting a small fine is the least of their problems.

As mentioned above, to my mind the more serious thing is the potential for having missed declaring director's loans (of over £5K each) for PAYE P11D purposes and this needs to be addressed asap in order to mitigate possible penalties.

Looking forward, as I've experienced so many times, unless clients appreciate the benefits of up to date accurate books and complying with regs, it's not worth acting for them.  They may well have had bad experiences in the past with accountants but it takes two to tango.

Best of luck


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01st Feb 2012 09:16

What have they done/are doing about HMRC & Corporation Tax

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01st Feb 2012 09:44

Where are you & the company

Where are you & the company based?

I might be able to help you out (or at least point you in the right direction!).


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01st Feb 2012 22:47

Thanks all

I have the VAT in hand, but nothing's been done about CT either.

I agree with Paul Scholes comments in that the books have to be brought up to date, and I have to help them get an Accountant in that has experience of dealing with a mess like this, (which is further confounded by other issues pertaining to the personal financial circumstances of the directors).

We're up in the north of Scotland.....we, or rather "they" just need to bite the bullet and get an Accountant in.  My plan is to get everything compiled into a summary format to make it as painless as possible.

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