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Sole director salary

Can the drawings of a sole director from a company be accounted for as salary retrospectively?

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Hi,

Is it possible to account for sole director takings as salary retrospectively? No Real Time Information returns have been made.

My concern is that, since salary is deducted for tax, the HMRC will argue that you cannot put something as salary retrospectively - i.e. you can't get the tax deduction. But under the old rules, before RTI, you could do this. I have heard that some accountants are still applying successfully the old rules...

Thank you so much for your help!

Replies (23)

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By Tim Vane
04th Oct 2018 16:26

Yes of course. Do either the director or yourself own a car, and if so, is it a DeLorean, and if so, does it have a flux capacitor?

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Replying to Tim Vane:
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By petia_kit
05th Oct 2018 07:53

ha ha - I got it :)

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RLI
By lionofludesch
04th Oct 2018 16:33

I vote No.

Under the old rules, before RTI, you couldn't do this but HMRC were less likely to notice.

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Replying to lionofludesch:
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By petia_kit
05th Oct 2018 07:54

I thought so as well :)

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By Ruddles
04th Oct 2018 16:58

Rod Taylor or Guy Pearce should be able to help.

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By Justin Bryant
04th Oct 2018 17:04

Can't you just write off the director's loan account and then treat it as salary/bonus at that point (or as a dividend if he's a participator)?

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Replying to Justin Bryant:
RLI
By lionofludesch
04th Oct 2018 18:09

Justin Bryant wrote:

Can't you just write off the director's loan account and then treat it as salary/bonus at that point (or as a dividend if he's a participator)?

At today's date, in this year's accounts, maybe.

Depending on other factors.

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Replying to Justin Bryant:
By Ruddles
04th Oct 2018 20:32

No

At least not without RTI complications

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Replying to Ruddles:
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By Justin Bryant
05th Oct 2018 12:12

Why not? What RTI complications? (Not being an RTI specialist, I would have thought a director's loan on which market rate interest is payable is not within any real time reporting.) That Euan bloke used to be good at answering this stuff, but he's retired from this (once great) forum.

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Replying to Justin Bryant:
By SteLacca
05th Oct 2018 10:01

I suspect their may have been a misunderstanding of the proposal. I believe that you are correctly suggesting that the point of write off is, for example, now and that the resultant income is reported via RTI in the normal way in the current pay period, which would not cause any problems other than potentially HMRC extrapolating that pay to a full tax year for tax code purposes, which could result in them incorrectly restricting PA.

Easily fixed with a quick call to the ADL.

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Replying to SteLacca:
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By Justin Bryant
05th Oct 2018 12:09

Noted (that this seems to work and so can be treated as a dividend if it's a participator) and thanks.

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Replying to Justin Bryant:
RLI
By lionofludesch
05th Oct 2018 12:18

Justin Bryant wrote:

Noted (that this seems to work and so can be treated as a dividend if it's a participator) and thanks.

Does it ?

That depends what year the OP wants the payment to fall into.

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Replying to lionofludesch:
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By Justin Bryant
05th Oct 2018 12:37

The dividend treatment (if relevant for such a loan write-off) is mandatory under statute & is not optional, so you just apply the relevant legislation there (that disapplies ITEPA 2003) to determine the relevant dividend tax point date etc.

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Replying to Justin Bryant:
By Ruddles
05th Oct 2018 11:36

The problem is that RTI is a payment-based system - it follows that any payments made in advance of a salary credit to the loan account should, strictly, be subjected to RTI at the time of payment. It was a well-documented issue at the time when RTI was being introduced.

I say "strictly" because most choose to ignore the rules.

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Replying to Justin Bryant:
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By petia_kit
05th Oct 2018 07:54

Thanks, good idea

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By andy.partridge
04th Oct 2018 17:14

No

Next . . . .

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By atleastisoundknowledgable...
04th Oct 2018 18:17

Is there already a payroll scheme in place?

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Replying to atleastisoundknowledgable...:
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By petia_kit
05th Oct 2018 07:55

No, so it would look weird to set a scheme and process salary for last year.

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Replying to petia_kit:
Bramble
By Chris.Mann
05th Oct 2018 08:37

In all reality, you can't rewrite history.

Forward planning, would be the ideal. Regretfully, not all client's want to take part!

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Replying to Chris.Mann:
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By petia_kit
05th Oct 2018 09:03

Very true!

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By Justin Bryant
09th Jan 2019 19:43

This case seems to support the view that you can have plenty of retrospective flexibility on what's the nature of any cash extractions in the period re dividends at least.

http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j10861/TC0...

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Replying to Justin Bryant:
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By petia_kit
14th Feb 2019 14:02

Thank you for your help!

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By Justin Bryant
14th Feb 2019 18:04

You're welcome. As an aside, what's happened to Ruddles?

Time for a small dog joke. What do call a zoo full only of rubbish little dogs?

...........A Shitzoo!

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