Hi
I have a company who has a May 2014 year end. It is the first accounting period for the company and they have just come to me this week(after the company's year end).
The director would like to show a salary for 2013/2014. Currently Software shows losses of £20,000 in accounts, so dividends cannot be paid. Co has 3 3employess on payroll. Client has put money in company himself, so company owes him around £15,000.
Have discovered that P35 for 2013/2014 has not been submitted yet!!! Now based on this info, I was wondering what his options are if he wanted the accounts to show a salary. Can the accounts for the first year of the company show directors fees accrued of approx. £9,000 (so no NI or tax) (so not actually paid). However with RTI, as P35 has not been submitted for 2013/2014, the only amendment required would be to file a revised RTI for April 2014 showing a month 12 directors accrued pay of approx. £9000. Is this amendment going to be problematic with HMRC, be flagged up in any way? As long as salary is paid 9 months after the year end, it should be a tax allowable expense.
If it was shown as a bonus, would there be the same problem with RTI as accruing director remuneration? Or is there a simpler way of accounting for salary opportunity for previous tax year forgone?
Many thanks
Replies (27)
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First things first
Firstly advise client that even if it were possible there would be no advantage to him in showing a salary in the accounts. If he accepts that wise advice you will be able to stop worrying about whether, and if so how, it might be possible to do so.
Paying a bonus would not save his allowances
as it would be taxable 14/15 when paid anyway. You cannot rewrite the past to the extent that you/he wants. It is a lesson for him to take proper advice early
Do you fully understand PAYE & RTI?
Have discovered that P35 for 2013/2014 has not been submitted yet!!!
Can the accounts for the first year of the company show directors fees accrued of approx. £9,000 (so no NI or tax) (so not actually paid). However with RTI, as P35 has not been submitted for 2013/2014, the only amendment required would be to file a revised RTI for April 2014 showing a month 12 directors accrued pay of approx. £9000.
There is no such thing as a P35 under RTI. The nearest you get is an End of Year declaration on the final FPS or a separate EPS. Are you saying that the EOY return has not been submitted?
Did the client file FPS reports for the payments to the 3 employees, using either HMRC Basic PAYE Tools or payroll software? It is too late now to submit any RTI reports for 2013/14 other than an Earlier Year Update, which he could do with BPT if any software that he uses does not have the facility.
For 2013/14, a salary of anything over £7,696 would incur NI contributions. If you were to re-write history and process fees of £9,000, the client would be charged interest, if not a penalty, for the late payment of the PAYE.
Forgetfulness can be expensive.
Earn your money by helping your client plan for the future, not by rewriting history. The company didn't make a payment, nor did it advise HMRC through RTI that there was a salary (which could have been credited to his director's account). So unless there is documentary evidence to the contrary, it didn't happen, did it?
Exactly!
I was thinking the same thing! Rewriting history almost always come back to bite you. In fact, at Broniec Associates, that's exactly what we get paid for!
Ugh!
I was thinking the same thing! Rewriting history almost always come back to bite you. In fact, at Broniec Associates, that's exactly what we get paid for!
Are you aware that shameless plugs are against house rules?
.
I was thinking the same thing! Rewriting history almost always come back to bite you. In fact, at Broniec Associates, that's exactly what we get paid for!
Are you aware that shameless plugs are against house rules?
No advantage of the plug considering they are US based.
1984 or 2014 World Cup
I was thinking the same thing! Rewriting history almost always come back to bite you. In fact, at Broniec Associates, that's exactly what we get paid for!
Is it Winston Smith ? Or Luis Suarez ?
Forgot?
You say director forgot to take salary. Was a 2013/14 salary/fees for the director mentioned in any documentation e.g. minutes of company meeting. If it was and he merely forgot to pay himself then you could make the payment through his directors loan account.
Surely
it still wouldn't be taxable in 2013-14 would it, as not paid until 2014-15?You say director forgot to take salary. Was a 2013/14 salary/fees for the director mentioned in any documentation e.g. minutes of company meeting. If it was and he merely forgot to pay himself then you could make the payment through his directors loan account.
Refer to an earlier thread
As set out by previous respondents, you cannot rewrite history. But you also need to be aware of the director deemed 'paid' rules, which can mean payment was in 2013/14 dependent on decisions made before 5 April 2014 (and not after May year end!)
This thread contains useful references and shows CT treatment mirroring personal tax treatment.
https://www.accountingweb.co.uk/anyanswers/question/accrued-directors-bo...
To be fair ....
.... if he's wealthy enough not to notice he's not taken a salary, he's wealthy enough to miss out on his personal allowance.
Pointless
It seems a pointless exercise to attempt to retrospectively pay a Salary only to serve to increase the Company's losses for offset against future profits (of same trade). Is the business actually a going concern?
Assuming there are no other employees I would attempt to have the 2013/14 PAYE Scheme closed and any penalties struck out and re-register later in 2014/15.
Also, make sure you get paid first.
Invention
There is something you seem to be making up, but your post is so confusing I can't tell quite what it is.
The short answer
Arrabita, if I were you I would call it a day on this thread before you get buried in pious advice!
I think what is being said is that yes, if that were the case then it would seem to allow the directors salary to be reflected in the older year, thus using some of his Personal Allowance. However they are at pains to distance themselves from any opinion which could possibly be viewed as being anything other than totally righteous.
Amen
With good reason
Giving advice to act dishonestly is no good for anyone. An accountant caught aiding in dishonesty is going to end up with about as much trouble as the person they aided. Setting the client up for a nasty HMRC enquiry would hardly be acting in their best interests either. Do you think having found one undeniably dishonest thing HMRC aren't going to sniff around for more? However they are at pains to distance themselves from any opinion which could possibly be viewed as being anything other than totally righteous,
You call it righteous. I call it avoiding unnecessary grief.
The worst accountants
Are not the ones who don't know the rules. They are the ones who do know the rules but don't apply them. They sacrifice their integrity in an attempt to strengthen the client relationship.
Nudge nudge, wink wink, let's keep this between ourselves. And if HMRC ever ask, just say . . .