I have taken on a new client - Ltd co and director, started trading Jan 14 and first accounts to 31 Jan 15 already late. Previous accountant only set up PAYE scheme in July 2015. Having reviewed records director being withdrawing around £2,500/month since April 2014. I want to declare part of this i.e. £663/month as salary from April 14 to Mar 15 so he saves around £1,600 in CT.
Can I do an EYU for 2014/15 even though no previous info has been filed for that year and PAYE scheme only set up in July 15 i.e. 15/16? If I can, will penalty be charged for late submission?
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You may very well "want to
You may very well "want to declare part of this as salary", but do you have any evidence that it was, or is that just wishful thinking? Were the payments consistent and regular and did the director believe he was paying himself a salary, and if so, was that salary just some arbitrary portion of the monies he was extracting? Your suggestion that you wish to treat only part of that money as salary does seem to indicate that you are just making up past events to suit. Which is of course, up to you, if that's the sort of accountant that you wish to be.
From the angle I'm looking at it, these payments seem very much like loans to the director. But I do not myself have the full picture.
In my opinion yes it is unethical to save tax by just making up history, but like I said, you will have the clearer picture and if the client genuinely thought he was paying himself a salary, rather than just extracting money I would be happy to declare it as such. My comment about making up past events is only applicable if you were just looking at somebody extracting money randomly and without any understanding that it was a salary, so if you are happy that the director believed it was salary then I withdraw the comment - all you have is somebody whose accountant has not filed correct paperwork to match the facts, rather than facts being made up to fit the circumstances.
So in this case if you are satisfied then I think you can treat as salary. If you set the salary at a rate below the LEL then there are no RTI implications. Others on here are undoubtedly more able to advise on whether larger payments can be backdated - it's not something I've ever done, but either way it may be simplest to just declare it as salary for CT and SA purposes and fess up to HMRC about the PAYE situation when/if they come and ask. The remainder of the payments I would classify as a loan. As it's too late to declare a dividend within the 9 month period there will probably be s455 and possibly BIK implications on the loan account to deal with as well.
Practical issue
Are you saying that the PAYE scheme was set up in July 2015, giving July 2015 as the date of the first payment? If so, I think that it would be impossible to file an EYU for 2014/15. However, if a scheme was set up in July 2015 quoting a date up to 5 April 2015 as the first payment date, you could file an EYU.