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Small Ltd Company - Annual Return

Small Ltd Company - Annual Return

Hi

All First off, I'm completely AAT qualified and currently sitting my CIMA Operationl exams. I’ve worked as a management accountant for apx 5 years now. My first question is, am I allowed to submit the year end/ annual return for a small limited company or does it need to be passed over to a fully qualified accountant/ practice?

I’ve produced the P&L and balance sheet for a close friends small limited company (last year’s turnover was £36k). Everything has been done on a cash accounting basis so nice and simple accounts. However, he’s been withdrawing cash from the business throughout the year and referring to it as “dividends”, am I right in thinking that these should actually be classed as and going through a directors loan account and not the dividends account?

Surely there should only be one withdrawal of dividends after the company’s yearend and have made a profit…

Thanks in advance!

Kim

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By Kevkava
23rd Feb 2016 13:27

Anyone can submit accounts, tax returns etc. But you need to make sure you are not breaking any of the CIMA / AAT  rules first.

But whether you should is another matter - theoretical expertise is good, but you may need more experience in an accountancy practice to better understand some of the practical considerations.

A company can pay as many dividends in a year as it wants - most plc's pay 6-monthly or quarterly for instance. As long as the documentation is secure - minutes, counterfoils etc. and sufficient post-tax profits there shouldn't be any problem. But does your 'close friend' have any other source of taxable income? If not, is he taking a salary from the company which would reduce his CT bill? It's this sort of practical consideration that makes an accountant's advice valuable - are you sure you're experienced enough to fulfil that role? If not, you should be advising your friend to look elsewhere for professional help.

Thanks (2)
23rd Feb 2016 13:33

I agree with the above, but would just add that if you have prepared the company's draft accounts on a "cash accounting basis" (they would be "nice and simple" in that case wouldn't they?) you need to hand the job over to someone else if you don't understand why that is a problem

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23rd Feb 2016 13:36

Cash Accounting exemptions
Suggested read.

http://www.hmrc.gov.uk/manuals/bimmanual/bim70010.htm

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By NH
23rd Feb 2016 13:55

Ltd Comp

free-rider wrote:
Suggested read. http://www.hmrc.gov.uk/manuals/bimmanual/bim70010.htm[/quote]

This link is irrelevant - we are talking about a company here

Exclusions

The cash basis is available for unincorporated businesses only, companies and limited liability partnerships cannot use it.

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23rd Feb 2016 13:59

Oops !

Maybe you're not quite ready yet 2791KG.

As others say, you need accruals accounting for a company.

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By 2791KG
23rd Feb 2016 14:35

Thanks for your comments all, was just hoping to help save him a bit of cash!  Completely agree with everything you have all said though and will take on board.

There's that little going through the accounts I'm more than confident that the information I have produced is correct, my main concern was the treating of these "dividends".

I will however, send over the draft accounts to a practice just for safety for both myself & the company.

Thank again

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