Credit salary to director's loan account

[Contreras]

Can salary be credited to the DLA or must it be paid physically?

Is there any time limit or deadline to the payment, after the RTI submission?

Is a simple spreadsheet sufficient, showing the DLA credits/debits?

Any other caveats to add?

If it matters, DLA is already in credit (owed to director) and would remain outstanding at company year end.

Thanks.

[malvolio]

Can't think of any reason, legal or otherwise, to do so. Care to elaborate?

[jamesbrown]

I don't foresee any problems with this (if there are cashflow issues, by way of example). It is really no different than loaning money directly to the business. However, bear in mind that any tax would be due at the time you credited the salary to the DLA, not when you actually paid it out later.

[jamesbrown]

( In other words, to be clear, you are crediting the net amount to the DLA. )

[CatOnMat]

Can't think of any reason, legal or otherwise, to do so. Care to elaborate?

One good reason is if LtdCo has an account which pays interest whereas personal current account does not (or not over a certain max amount) - assuming enough personal reserves no point in taking the salary out of the company bank account prematurely in that case.

As mentioned though tax would be due in the tax year applicable to that payroll run, rather than whichever (future) point at which you take the funds out to your personal bank account.

[Lance]

Can't think of any reason, legal or otherwise, to do so. Care to elaborate?

I was a director of a small company years ago that had serious cashflow issues.
DLA was used extensively to ease the situation.
As a contractor the only use I've had for DLA was to balance errors.

[malvolio]

I was a director of a small company years ago that had serious cashflow issues.
DLA was used extensively to ease the situation.
As a contractor the only use I've had for DLA was to balance errors.

Except the OP appeared to be asking about salary from HisCo going into the DLA in HisCo (as opposed to using the DLA properly to move money into the company). That's just changing labels in the accounts; nothing wrong with that but curious as to why.

[northernladuk]

Except the OP appeared to be asking about salary from HisCo going into the DLA in HisCo (as opposed to using the DLA properly to move money into the company). That's just changing labels in the accounts; nothing wrong with that but curious as to why.

I reckon it's as simple as him just wanting to pay it off with money he doesn't need and doesn't want to transfer out and back in.

His accountant should have been is first port of call where he would have gotten the answer and more in a conversation rather than us running round like headless chickens.

[Contreras]

The reason is for cash flow. Salary is a lump sum at the level where employer NICs to pay but no personal tax.

I have been advised that under RTI rules, the salary must be physically paid on or shortly after an RTI submission is made, that being no later than the following 5th of the month.

Even if this is incorrect advice it would be useful to know what if any basis there could be for it (NL: yes, I have asked!) - to try to understand the source of confusion.

[Maslins]

This is absolutely fine. In practice it's what always happens, unless you physically pay the salary at exactly the same time the payroll is processed.

Ie there's two separate things:
- payroll processed -> salary owed to you, creates the creditor.
- payment of salary made to you, removes/reduces the creditor.

Doesn't matter if there's a delay of seconds or years between these. If salary is processed but not paid, it just builds up a creditor owed to that person. Of course with "normal" staff they'd get grumpy pretty quickly if they weren't paid, but where it's you/your company, you may have reasons for not wanting the cash now but still having the payroll processed now. That's fine.