My friend contracted through a limited company (YE 30TH September) but never set up a PAYE scheme. I’ve told him about the LEL. He stopped contracting in December 2016 and started a new PAYE job in February 2017. He needs to fill in a tax return because he has to put through a big dividend from his limited company due to using the company bank account like a personal bank account. (I’ve given up trying to tell him otherwise).
With regard to the 5th April 17 tax return is he able to show any salary from his directorship (e.g £5,820) considering no PAYE scheme is in place. If it helps the combined salary from the two employments will be under the personal allowance, infact it will be under the PT(Primary Threshold)
I have trawled the Internet for examples but couldn’t find a similar scenario so I thought I would ask accountingweb.
Any replies would be very much appreciated
Replies (7)
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Of course he must declare the salary. To not do so would potentially be tax evasion.
EDIT - if the amount borrowed from the company before the dividend was large then he may also have a benefit in kind to declare.
Of course he must declare the salary . . . if he took one. Frequent dipping into the company bank account does not necessarily constitute a salary. Which payments were 'salary' and which payments were 'loans' and how have you determined the different treatment?
If he receives a salary from more than one employment then both salaries should be reported through PAYE regardless of the tax position.
Well, to be pedantic, we're told that he stopped contracting services through the company in December, the salary paid to him as an office holder could be for any period since he hasn't ceased being a director.
Ultimately of course, the facts of the matter are more likely that the salary was neither paid prior to December 2016 nor within the tax year to 5 April 2017 but is instead a time machine salary.
Let's establish the facts. Did he pay, or record an intention to pay that salary from his company, or is this another post asking if it's OK to re-write history?