I'm the sole director of my company and have operated a loan account for years, it's never been a problem because I make sure I pay it back when I'm supposed to and get relief.
HMRC are now getting to the end of their enquiry and found a sale I'd forgotton to record. It was a cash sale that I missed, I don't often get paid in cash, so fair enough I guess.
They've asked me to re-write my loan account for every year since then with this amount in mind (£2,375) but I don't know how. I thought they could just charge me £593.75 but they say it doesn't work like that.
Any help would be appreciated, apart from this I've managed OK up until now!
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I note that you sell whatever it is you sell for valuable consideration (in this case cash). This idea of people paying for things has really caught on hasn't it?
There is a whole profession dedicated to sorting out this kind of problem. If only there was a way to put a value on that advice.
I note that you sell whatever it is you sell for valuable consideration (in this case cash). This idea of people paying for things has really caught on hasn't it?
There is a whole profession dedicated to sorting out this kind of problem. If only there was a way to put a value on that advice.
Hi Tim, I'm sorry I didn't mean to offend, I understand the value of professional help. I did approach an accountant (there is only one in the local town) and they are pushing me to become a client before they'll help. I would have preferred to just pay for their time to help with this but maybe it doesn't work like that.
Apart from this mistake, on which I'm not getting a penalty, my business has been fairly straight forward and I've kept my head above water until this.
I understand the value of professional help. I did approach an accountant (there is only one in the local town) and they are pushing me to become a client before they'll help. I would have preferred to just pay for their time to help with this but maybe it doesn't work like that.You say you understand the value of professional help. Yet you casually dismiss your need for it in everything you say. See my other comments about you potentially missing savings you don't know exist.Apart from this mistake, on which I'm not getting a penalty, my business has been fairly straight forward and I've kept my head above water until this.
To do any work for you, there are various procedures an accountant is legally required to perform. To go through those just for telling you how to recalculate your loan account would be uneconomic. It's like asking a printing company to print you a single business card.
abby606 wrote: I understand the value of professional help. I did approach an accountant (there is only one in the local town) and they are pushing me to become a client before they'll help. I would have preferred to just pay for their time to help with this but maybe it doesn't work like that.
Apart from this mistake, on which I'm not getting a penalty, my business has been fairly straight forward and I've kept my head above water until this.
You say you understand the value of professional help. Yet you casually dismiss your need for it in everything you say. See my other comments about you potentially missing savings you don't know exist.
To do any work for you, there are various procedures an accountant is legally required to perform. To go through those just for telling you how to recalculate your loan account would be uneconomic. It's like asking a printing company to print you a single business card.
Excellent point, I should have thought of that. I guess my downfall is I enjoy running my business myself but I recognise if I had an accountant, this probably wouldn't have happened.
When you say, it's never been a problem, it is now, isn't it?
Go back to the date of this omitted transaction and write everything up again from there.
It's no less straightforward than that.
Thanks - I should have been more specific with my question, my fault. I've gone back and added this omitted amount to the overdrawn amount but I'm not sure if I still get relief for the amount I had originally paid?
Is it sufficient to re-write just using the opening and closing balance or should I go line by line for the first 9 months after my accounting period and credit any amounts repaid against the new debit amount?
Thanks - I should have been more specific with my question, my fault. I've gone back and added this omitted amount to the overdrawn amount but I'm not sure if I still get relief for the amount I had originally paid?
Is it sufficient to re-write just using the opening and closing balance or should I go line by line for the first 9 months after my accounting period and credit any amounts repaid against the new debit amount?
Oh dear - you've not grasped the new matching rules ?
Can I suggest that you make a resolution to keep your fingers out of the till and live on salary, dividend or a combination of the two ? Your life will be so much simpler !!
Thanks for the accusation of tax evasion - this was a single mistake, there are no "fingers in the till". MDRC should evidence that.
If by matching rules you mean bed and breakfasting, I understand them. If something else, clearly not then.
There's no such implication. It's just free advice. You have absolutely no obligation to take it.
However, your current difficulties arise because you're not able to keep your money separate from the company's money. Like many OMB directors you see the company's money as yours to dip into as and when you feel like it.
Your best plan is to point out to HMRC that this is just a timing difference. In effect you are being asked to make a loan to HMRC amounting to a quarter of the amount you "borrowed" yourself.
Offer them the s455 charge of £593 and claim it back (by repaying the loan) at the first opportunity.
Presume Excel is your friend.
Surely you just have a loan account analysis, sorted by date, with monies drawn (paid to you direct) etc and monies repaid (thinks you have paid for, declared dividends etc, opening balances and closing balances.
Well, insert the missing income at the appropriate date, do a sort by date and then let excel recalculate opening/closing balances all the way down the page.
I am struggling to really understand the issue, it surely just means you are more overdrawn all the way through the period since the date of the omitted cash transaction.
As an aside, do you have a company bank account? If not that would be my first step for the future, if everything goes through the bank account nothing gets missed and you have fewer issues re completeness of the records.
I just wasn't sure if the s458 relief for the amount originally repaid counts against my "new" s455 charge.
Yes I do have a company bank account - the accounts system I used at the time was fairly simple, the one I use now actually matches things up against the bank account for me so I can't miss something like this.
You say you've managed OK up until now. I am assuming you are taking HMRC finding only this one item as proof of that.
HMRC are interested in you paying more tax. As a result, enquiries tend not to point out things you could be doing that would save you tax. There are people whose job is to do that though.
Yes both in terms of getting everything together and submitting my return and the accounts. My business is straight-forward (I design and manufacture clocks) and my expenses don't really change. I used to do it as a sole trader but wanted the limited liability just in case.
Dealing with HMRC has caused some stress but they haven't been difficult to deal with.
If any other returns get selected I'd imagine my "do it yourself" attitude will have to change!
My business is straight-forward (I design and manufacture clocks) and my expenses don't really change. I used to do it as a sole trader but wanted the limited liability just in case.
If you're running the company exactly the same as the sole trader, then you are almost certainly missing out on several tax planning ideas. If only you genuinely valued professional advice that could tell you about them.
I can fix clocks, its easy.
You just smash out all the old workings with a hammer, and pop a quartz wristwatch over the dial.
Works just the same. i dont need to pay no clock maker big bucks to do it for me.
OK everyone, I get it. I should have an accountant and I'm an idiot for trying to do things myself.
Just a point, do you not have two tax issues re the company accounts re the omitted sale;
1. Overdrawn DLA and S455 tax thereon?
2. Understated sales so understated profit so underpaid corporation tax?
Presume not vat registered otherwise there would likely be a third issue.
Also, as the addition of the omitted income will increase the balance each year on the loan account, this would increase the benefit in kind on the beneficial loan interest. There could therefore (assuming the £5,000/£10,000 loan limit was exceeded at any time in the tax year) be additional personal income tax, class 1a NI, interest and late P11D penalties.
I don't really see the issue here.
At worst the DLA has been overdrawn by £2,375 since the cash sale was pocketed, and that will result in a s455 tax charge to pay on that and a bit of interest from the date it should have been paid.
Presumably the sale has been omitted too - so there'll be a bit of tax, interest and possibly a penalty there too.
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Fellow members are quite correct to provide, what may be considered, blunt comments, when they take the view that their (professional) legs, are being lifted.
Wouldn't you do just the same, if someone asked you for the free lunch?
The problem is that it is just not worth taking on such a job from accountants point of view.
People asking for free advice dose not normally go down to well on this forum. So you have to pay for advice or deal with the consequences. Would you fix clocks for free?
I don't mind giving free advice. I've had plenty on here myself.
But I do object folk wanting a detailed answer on very little information. There's no way we can advise on how all these transactions matched up before and after this omitted income. That's just spade-work.
It is interesting to speculate what the situation would be like under MTD.
The Company Accounting Records would have to be maintained using MTD compliant software, but despite this, monies could still be inadvertently omitted from the accounting records.
So who would be responsible for providing the advice as how to correct the accounting records. I would imagine the first port of call would be the Software suppliers as part of their support services and secondly, HMRC to give advice on the tax implications.
I can say for sure that if I was engaged to fix this where prescribed software is involved, my fees would be astronomical.
To be honest i doubt the software providers will be providing this type of support. As for HMRC i doubt they would be helpful.
I suspect HMRC will increase the amount of investigations,and this type of work could well increase. And i certainly will be charging a high hourly rate.