Thanks for all the responses so far -I had already looked into changing the company type and there is no easy mechanism for this and you can't take dividends with no shares. If only it has been that simple I wouldn't be on here asking the questions.
It seems strange that people who are not familiar with such matters who make a simple mistake have to go through a lot of trouble to unravel it - if only they had seen an accountant at the outset.
Having considered the matter further I am having to go with Option A so better start pulling the accounting records together (that will be fun).
Yet another addition to the increased workload - will we ever catch up.
The poor Accounting Records are an issue as the profits need to be calculated to get all of the profits out of the old company by salary as dividends can't be paid so the figures need to be accurate.
Running the salary into the new tax year is not an option as this is there only source of earnings and would mean them losing out on personal allowances.
They will have to take earnings from the New Company so don't want two year's earnings in one tax year.
The client won't understand the options they have just instructed us to try and get everything sorted out which is difficult giving the mess they have created. - I am just trying to figure out how to resolve this mess and move forward with a new properly set up company, but thanks for your input - very informative.
Don't Forget that the VAT now paid will reduce his profits for prior years - he will have paid tax on turnover and this must now be reduced for the VAT paid. This should result in tax refunds which could help with the cash flow.
Also where any of his customers VAT registered - if so you could issue credit notes for the original invoices and reissue them with VAT.
The customer will then pay him the VAT and claim it on their next VAT return so they won't be out of pocket.
My answers
There was 2 at the time and one after sale
Thanks for comprehensive answer - all clear now.
Just thought we would check this.
Thanks for all the responses so far -I had already looked into changing the company type and there is no easy mechanism for this and you can't take dividends with no shares. If only it has been that simple I wouldn't be on here asking the questions.
It seems strange that people who are not familiar with such matters who make a simple mistake have to go through a lot of trouble to unravel it - if only they had seen an accountant at the outset.
Having considered the matter further I am having to go with Option A so better start pulling the accounting records together (that will be fun).
Yet another addition to the increased workload - will we ever catch up.
The poor Accounting Records are an issue as the profits need to be calculated to get all of the profits out of the old company by salary as dividends can't be paid so the figures need to be accurate.
Running the salary into the new tax year is not an option as this is there only source of earnings and would mean them losing out on personal allowances.
They will have to take earnings from the New Company so don't want two year's earnings in one tax year.
The client won't understand the options they have just instructed us to try and get everything sorted out which is difficult giving the mess they have created. - I am just trying to figure out how to resolve this mess and move forward with a new properly set up company, but thanks for your input - very informative.
We moved to a Continuous Ink Printer a few years back - Epson 4500 (also used for scanning and wireless printing).
Our ink costs are now a faction of what they used to be - you but bottles of ink instead of cartridges and they last forever.
Trying to move away from printing - one of these days we will get there.
Still to discuss this with the client.
That is what i had originally thought but this does not recognise the liabilities for deposits due to customers.
Thanks for all your comments - especially at this time of the year - can see a way forward now.
Don't Forget that the VAT now paid will reduce his profits for prior years - he will have paid tax on turnover and this must now be reduced for the VAT paid. This should result in tax refunds which could help with the cash flow.
Also where any of his customers VAT registered - if so you could issue credit notes for the original invoices and reissue them with VAT.
The customer will then pay him the VAT and claim it on their next VAT return so they won't be out of pocket.