Start-up first tax return

[TheFaQQer]

In other words, if the only person you employ doesn't meet any of the above criteria, there's no need to register for PAYE and operate RTI. If you employ somebody else who does meet the criteria, then you have to register for PAYE and you'd then be required to operate RTI for all employees.

The OP had a job last year, though, so according to the HMRC document since it's a second job if they wanted to pay themselves a salary they would need to be operating PAYE and have declared the payments via RTI.

[TheCyclingProgrammer]

In the circumstances, and assuming no tax liability, I think I'd quietly sweep that one under the carpet.

I'm inclined to agree.

The OP had a job last year, though, so according to the HMRC document since it's a second job if they wanted to pay themselves a salary they would need to be operating PAYE and have declared the payments via RTI.

You're right but wouldn't it depend on when they decided to start paying themselves? IOW, as long as they back-date the monthly salary only as far as the first month after their previous employment ended and each payment is below the LEL there shouldn't be an issue - each payment can be shown as a credit to the DLA and they can just take it out when they want. They can then show it on their self-assessment as employment income.

Something that just occurred to me which might explain why OPs accountant hasn't mentioned dividends is that it wouldn't be possible to take any dividends that are taxed in the previous tax year without backdating them. They can obviously declare a dividend now but it would be taxed in the current tax year.

Either way something is going to have to be done retrospectively and if I was OP I'd be pretty annoyed with myself and my accountant for not sorting this before the previous tax year ended, when there would have been a bit more room for manoeuvre without creative accounting.

[Lewis Segi]

More info

Thanks a lot CONTRERAS, TheCyclingProgrammer and TheFaQQer. I really appreciate you had taken your time to read the post and help me out.
In response to some of the questions:
1) I am self-employed (and registered for self assessment too)
2) The £15K profits are after reimbursement of the expenses/director loan
3) All expenses are genuine and have been well recorded

Having read all your comments, I guess the best option would be:
- Claim the approximately £10K costs originally paid by me. This would then be a cost to my company and I will keep that money. I think P11D does not apply to this case but I am not sure at all. Any help?
- The last payment for my former PAYE employment was in Sept 13. I am planning to record a salary of £470/month from Oct 13 to July 14. I assume that since is is a different employer, I do not go over the LEL threshold and therefore not having set up a PAYE for this salary may be OK (it is the only salary in the company). Any comments here?
- I will record this salary on my self assessment as a normal salary income.
- For 2014/2015 I am already taking the steps to set the PAYE salary + dividends scheme, which I believe is the most efficient solution for remunerations up to £40K.

Any comments/ideas/corrections on the statements above will be extremely appreciated.

Again, thanks all for your comments so far.

[TheFaQQer]

1) I am self-employed (and registered for self assessment too)

If you are employed by a company, regardless of whether you own 100% of that company, you are NOT self-employed for tax purposes. You are an employee.

[TheFaQQer]

- Claim the approximately £10K costs originally paid by me. This would then be a cost to my company and I will keep that money. I think P11D does not apply to this case but I am not sure at all. Any help?

Without knowing exactly what the expenses were for, there is no way anyone can tell you whether you would need a P11D or not completing. For example, if there are any travel or subsistence expenses (apart from normal mileage rates), then they would need to be on your P11D.

If you needed to complete a P11D, then you have missed the filing deadline for the last tax year, which would incur a penalty.

- The last payment for my former PAYE employment was in Sept 13. I am planning to record a salary of £470/month from Oct 13 to July 14. I assume that since is is a different employer, I do not go over the LEL threshold and therefore not having set up a PAYE for this salary may be OK (it is the only salary in the company). Any comments here?

If you are completing a P11D then I think you have to have a P60 as well, which had to be issued by the end of May. Obviously the employee isn't going to complain, but it's something else to be careful of.

- For 2014/2015 I am already taking the steps to set the PAYE salary + dividends scheme, which I believe is the most efficient solution for remunerations up to £40K.

Make sure you do it right and have all the paperwork in place at the right time. If you are operating PAYE then you will need to be following the RTI guidelines as well.

Any comments/ideas/corrections on the statements above will be extremely appreciated.

Get professional advice from someone who is experienced with working with contractors. If you have an accountant, then they should be the one you are asking these questions to. If you haven't got an accountant, then there are recommendations in the sticky at the top of the Accounting / Legal sub-forum.

[Lewis Segi]

My mistake

If you are employed by a company, regardless of whether you own 100% of that company, you are NOT self-employed for tax purposes. You are an employee.

You are right, sorry for the confusion. How about the other bits of the plan...does that make sense?

Thanks

[TheCyclingProgrammer]

You are right, sorry for the confusion. How about the other bits of the plan...does that make sense?

Thanks

I can't add much to what TF said other than that I believe that if you're paying yourself under the LEL threshold and have no other employees then I don't think you need to set up payroll for the 2013/14 tax year.

Regarding the P11D, as I said before it depends what the expenses are. Business expenses can broadly be broken down into two groups:

* Expenses you incur in the course of doing your job - for most contractors this is normally business travel or travel to a temporary workplace (including any related accommodation and subsistence) + itemised business calls. You incur these costs personally, your company reimburses you and you claim personal tax relief on the reimbursement through your self-assessment to avoid paying extra tax. These costs are normally reported on a P11D (along with other things like BIKs) unless they are specifically exempt (e.g. AMAP mileage payments).

* Expenses your company incurs - this will normally include staff remuneration (salaries and expense payments), accountancy fees, equipment, stationary, admin costs, employer's NIC. These should normally be paid for by the company directly and bills should be in the company name wherever possible however HMRC accept that sometimes an employee will purchase things on its employer's behalf. As long you have your employer's permission and its clear to the supplier that you are purchasing on your business's behalf then you are entitled to be reimbursed without their being any personal tax implications and these payments don't have to appear on your P11D.

Based on the above you should be able to work out what needs reporting on a P11D and what doesn't.