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How should EPS and FPS apply to me as a director

Payroll HMRC

I run a limited company and I don't actually pay myself regularly. I maintain a director's loan account and at the end of the year split this between a salary and dividends. I pretty much live of funds transferred from the business throughout the whole year i.e. if I buy groceries/all personal expenses. 

I am confused though how payroll would work for me when an FPS is meant to be submitted for the salary paid? 

I am thinking that because I maintain a director's loan account it is as such a loan until I "decide" it is the salary at year end even though it has already been spent by me? 

So at the moment, it is like this

1. Using debit card for personal transactions

2. Maintaining the director's loan account 

3. Near year-end, decide on the salary and send through the FPS for this amount. So would really be only once a year.

4. Then update the director's loan account 

I guess the way I pay and draw from the business is not ideal but it an FPS is meant to be submitted for every payment that

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20th Feb 2019 17:59

Here's an idea.

Why don't you use your own money for the groceries instead of the company's ?

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By Mhuk
to lionofludesch
20th Feb 2019 18:14

Well, it is my only source of income so that would involve paying myself more regularly (which I think I will do from March 2019). However I haven't done this before but obviously, I will have to complete my corporate accounts for the year about to end and also self-assessment for the year ended April 2019.

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20th Feb 2019 18:01

Here's another idea.

Follow the advice given in your previous thread:-
https://www.accountingweb.co.uk/any-answers/directors-salary-paid-for-bu...

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By Mhuk
to Wanderer
20th Feb 2019 18:17

I did exactly that and set up my paye scheme and completed my EYU. That was really for last year and I am looking at this year now, Sherlock.

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to Mhuk
20th Feb 2019 18:20

Not that advice, the advice advising you to appoint and consult an accountant, Sheerluck.

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to Wanderer
20th Feb 2019 18:31

Wanderer wrote:

Here's another idea.

Follow the advice given in your previous thread:-
https://www.accountingweb.co.uk/any-answers/directors-salary-paid-for-bu...

In which you responded to my suggestion, that you should appoint an accountant, by saying "How do you know I didn't have an accountant?"

Being a director of a company involves numerous legal formalities. Either you have the knowledge to carry these out, or you appoint someone to do it for you. That's the choice you have.

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By Mhuk
to Accountant A
20th Feb 2019 23:20

Yawn, yawn, yawn. Very easy to see beneath the surface here. You are focused on the point that I get an accountant because of a grievance over money. For your information, I have an accountant who prepares all my end of year accounts but I only work with him to do that at the end of the year. This is a cost management initiative. The first year I had an accountant all year round and they charged £100 a month however I rarely needed to deal with them at all. An absolute waste of money. Now, I pay an appropriate amount to get everything completed. Accountant A - he looked after the allocation of dividends and salary at the end of the year and he is a chartered accountant. I also studied accountancy until the end of university so I am not a numpty at it either. Depending on anything else that pops up during the year, I will look for answers to simple questions or get some consultancy for more complex issues and I have received some great help on this forum before with the former even leading to some work for helpful contributors. You two don't fall into that category so I suggest you just don't bother replying in the future. Perhaps, pursuing the detective route might be more fruitful and mean you have less time on your hands!

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to Mhuk
21st Feb 2019 05:04

The problem here is you clearly don't have a clue about:-
a) The issue in hand.
b) The motivation of members posting and what they are focused on.
c) The value of proper, holistic advice.
d) Whether you are a numpty or not.
Studying accountancy at university is a way, way different from tax and real world practical advice backed by years of experience.

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to Mhuk
21st Feb 2019 08:59

The advice given is not a reflection of any grievance, but is rather a recognition of the fact that you have no idea what you are doing, and if you proceed as you envisage a veritable [***] storm is coming your way when HMRC catch up with you.

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20th Feb 2019 18:33

Mhuk wrote:

I run a limited company and I don't actually pay myself regularly. I maintain a director's loan account and at the end of the year split this between a salary and dividends.

PS If you are serious that you actually do that, you really really need to get some professional help because you are almost certainly making incorrect tax returns.

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20th Feb 2019 20:03

You're likely to have s455 and / or BIK issues re interest free loans.

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By spilly
20th Feb 2019 23:38

Sigh. If you ask for free advice please have the good grace to acknowledge that you might be doing something wrong.
You are acting as though you are a sole trader, rather than a company. Different, and much tighter, rules apply to companies.
You may regret not paying the £100 pm in the long run.

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21st Feb 2019 07:09

Another one coming on here for free advice with an attitude problem.

Can't we have ONE WEEK without this.

And some moderation from site owners wouldn't go amiss.

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21st Feb 2019 08:59

Another satisfied customer. ©

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21st Feb 2019 09:11

Perhaps your previous accountant was charging you £100 per month because they were trawling through your business account and working out what were private expenses and which were business. That can be very time consuming. Draw a salary and dividends and use that money for personal expenses. Speak to your current accountant I'm sure they will be pleased to help if it saves them time preparing your accounts.

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By Mhuk
to lesley.barnes
25th Feb 2019 12:12

They weren't but anyways thank you very much for your advice.

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21st Feb 2019 12:52

Your problem is the NIC rules. Every time you spend company money on a personal expense, then debit it to your DLA as a further loan, it is deemed by the NIC regulations to be a payment of earnings if the overdrawn DLA is later to be cleared by a credit of earnings.

So you have to do an FPS on or before the date of payment. You've probably broken the RTI rules hundreds of times already, judging from what you say.

There's no equivalent in the PAYE regulations - you don't pay PAYE on an employer loan - but that doesn't get you off the hook for NIC.

To operate in the slapdash way you currently adopt, you need to put your DLA into credit first, with salary (net of PAYE & NIC) or dividends. Then you can draw what you like, when you like, up to the credit balance in the account, without troubling the RTI system, because you're drawing money that's already been taxed (or at least taxable, if it's a dividend credited to the DLA). If your DLA is in credit before you pay a personal expense with a company card or cheque, the NIC rule deeming it to be earnings doesn't apply.

The NIC rules were written this way to stop directors abusing the system, which is what you're doing, and the RTI system's introduction didn't change anything. You've probably already clocked up a lot of penalties.

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By Mhuk
to David Heaton
25th Feb 2019 12:07

Thanks for that. I could easily just have a dividend payment earlier in the year or throughout because of retained earnings and I now have a monthly payroll in place. If some penalties come my way then so be it, but I'm trying to get everything in order.

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