HELP!!
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!!
Replies (8)
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DLA?
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.
David
Agreed
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!
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
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!).