Salary and Directors loan account

**northernladuk** · 3 February 2016, 10:23

So you are asking for some advice on how to commit fraud?

**jungleboogy** · 3 February 2016, 10:28

Originally posted by northernladuk View Post

So you are asking for some advice on how to commit fraud?

No not at all think you've got the wrong end of the stick. In the scenario posted I stated I work 16hrs per week but don't withdraw it all as salary each month. What is withdrawn equates to 12hrs per week. This is perfectly legitimate i.e. where invoicing for contracts lags behind salary payments. Hence, the remaining 4hrs is drawn from the directors loan account at a later date once invoices are paid into the business. The question is what should appear on the monthly payslip. Should it always record 12hrs per week or should the month's where a directors loan payment is received be added to the payslip or not ?

**northernladuk** · 3 February 2016, 10:35

Still don't get this. If you work less than 16 hours you get working tax credits. You work for 16 hours so shouldn't get them but ate trying fudge it so it looks like you are only working 12 and squirrelling the rest away from sight somewhere?

You using a Limited?

**NotAllThere** · 3 February 2016, 10:46

If you are working 16 hours or more, you are not entitled to the credit. If you pretend you are working less but are actually working more -that's fraud.

The money that is in the director's loan account is money the company owes to you. You received it and lent it to the company.

Your company is under no obligation to pay the fee for your services over to you as salary. As director you can pay yourself 1p an hour.

**jungleboogy** · 3 February 2016, 11:08

Originally posted by northernladuk View Post

Still don't get this. If you work less than 16 hours you get working tax credits. You work for 16 hours so shouldn't get them but ate trying fudge it so it looks like you are only working 12 and squirrelling the rest away from sight somewhere?

You using a Limited?

This is NOT fraud, I've stated clearly I work 16 hrs per week sometimes more. That is FACT. The working tax credit is available to people on low incomes who work 16hrs a week or more. The problem arises if the business hasn't collected invoices prior to payment of salary. Therefore, only 12hrs is claimed at certain times with the rest drawn down as a directors loan when thsoe funds are available in the business. You are correct in saying the surplus i.e. 4hrs is owed to me by the company but this doesn't have to have been received and lent to the company as 'NotAllThere' stated. This is money owed to me by the company but not taken at the time the payslip is processed.

P.S. The working tax credit is designed to encourage people to be in work i.e. if you work less than 16hrs per week you're NOT entitled to it, but if you do and are on a low income then you are entitled to it. e.g. it's to prevent cases where someone works say 1hr per week and wants to claim benefits. If you work 16+ then your contributind to the pot which helps pay the tax credit. Hence 16+ hrs is required. In this scenario I do work 16+hrs but if I don't get paid for the full 16hrs each month then I want to make sure I'm not penalised. Therefore, does the money drawn down from the directors loan account get reflected in a later payslip ? Basically it's salary due but not taken in each monthly payroll. Hopefully that's clear :-)

**seanraaron** · 3 February 2016, 11:21

Originally posted by jungleboogy

P.S. The working tax credit is designed to encourage people to be in work i.e. if you work less than 16hrs per week you're NOT entitled to it, but if you do and are on a low income then you are entitled to it.

I'm confused, are you getting a crap contract rate currently?

**jungleboogy** · 3 February 2016, 11:31

Originally posted by seanraaron View Post

I'm confused, are you getting a crap contract rate currently?

I'm actually asking on behalf a friend but just easier to use me as the example. It's a public service industry she works in part-time. I believe it is a limited company but is a social enterprise so may work slighlty differently. We'll assume it is a limited for my questioning. so yeah it's not well paid. I guess it's a similar principle to the low salary / dividend principle that most contractors follow. However, in this case it's just the timing of the invoicing by the company to generate the funds to pay the salaries that's out of sync so salary due is delayed and taken from directors loan account later.

**northernladuk** · 3 February 2016, 11:37

Blimey, begs all kinds of questions as to why you are using your LTD if you are working 16 hours a week on low income? That must a rate worse than Psycho's....

Talking about Psychocandy. He is our resident benefits expert and all round dole scrounger. He knows a lot about how to play the system and the like so he might be the one to help here.

**seanraaron** · 3 February 2016, 11:37

Originally posted by jungleboogy View Post

I'm actually asking on behalf a friend but just easier to use me as the example. It's a public service industry she works in part-time. I believe it is a limited company but is a social enterprise so may work slighlty differently. We'll assume it is a limited for my questioning. so yeah it's not well paid. I guess it's a similar principle to the low salary / dividend principle that most contractors follow. However, in this case it's just the timing of the invoicing by the company to generate the funds to pay the salaries that's out of sync so salary due is delayed and taken from directors loan account later.

Well hopefully that will clear things up for other people who likely read your initial post and thought you were "at it."

Salary and Directors loan account