Taking a break, not trading, salary?

[bownyboy]

I’ve decided to take a break of at least six months maybe more, not sure yet. My last invoice was submitted 29th April and paid mid May.

I spoke to my accountant to let them know (Gorilla) who said I should not take a salary when not trading as it’s deemed a trading expense.

I was planning on taking out £992 each month this tax year along with some dividends.

Based what I read here I assumed a salary was ok https://www.contractoruk.com/limited..._trading.html?

Has that changed since the article was written? Or are Gorilla being particularly cautious?

thanks,

[pr1]

You are still the company director with the responsibilities that come with that, so are entitled to receive a stipend. In my opinion, Gorilla are being particularly cautious.

[bownyboy]

Yeah, that’s what I assumed from my research.

I’ve pushed back to them and asked for further clarification.

[jamesbrown]

I think this is a non-issue - I would also push back on that (rather, just do it - they offer advice, sometimes their advice will be debatable, in all instances it is your call).

[eek]

Yeah, that’s what I assumed from my research.

I’ve pushed back to them and asked for further clarification.

I would be seriously considering moving accountant unless they have a good reason. You are being paid to run your company…

[northernladuk]

I would be seriously considering moving accountant unless they have a good reason. You are being paid to run your company…

I think moving accountant on this alone is massive overkill. The good reason is he's taking a break so won't be running his company. I totally agree with PR1 it's overly caurious but we don't know the conversation the OP had. If he said I'm going travelling for 6 months then stopping paying yourself makes sense as he isn't working (still overly cautious) but the OP can come back, and pay themself whatever they want when they return to make it up if they want to. Same outcome at the end of the year but with a break to represent him not working.

The link the OP posted talks about not trading inbetween contracts but the OP says taking a break which, depending on the situation, is slightly different. Is he non trading or taking a sabbatical. Granted I believe he can pay himself in both cases but they are technically different.

At worst it's overly cautious but could be technically correct depending on the conversation. Either way non issue as JB says IMO.

[Maslins]

I don't see that your company has stopped trading. You're just not working permanently.

Plenty of contractors will have breaks between gigs. Sometimes it'll be voluntary. Other times they're struggling to secure work. Neither mean the company's dormant.

As long as you keep the company ticking over, I don't see any issue with you continuing to draw the salary. In the short term it'll offset against current, or possibly prior year profits. If it ends up being longer term, it's worth considering your options further then.

[malvolio]

Despite all the people who think we use the company to save taxes, its real purpose is to smooth out our personal income from a a variable and inconsistent stream of work. On that basis, taking a salary a long as you have the fund to do so (and even after then with a bit of care an planning) is entirely reasonable.

It is possible that your accountant is of the school of thought that YourCo is merely a convenience to save you money and expects you to take out every penny you can as soon as you can. In which case, he's in the wrong job.

[eek]

Despite all the people who think we use the company to save taxes, its real purpose is to smooth out our personal income from a a variable and inconsistent stream of work. On that basis, taking a salary a long as you have the fund to do so (and even after then with a bit of care an planning) is entirely reasonable.

It is possible that your accountant is of the school of thought that YourCo is merely a convenience to save you money and expects you to take out every penny you can as soon as you can. In which case, he's in the wrong job.

or he is working on the basis that all his customers are really Managed Service Companies or a variation of the same...

Frankly the advice tells me that the person who answered the question isn't competent to answer what seems to be a very simple question....

[Guy Incognito]

You absolutely can take a salary you are running the business!