Payroll when the company has funds

[Hawkeye]

Hey guys,

After being away from the Outside contract world for a while am getting back into the swing again. My first client will not be paying my invoice until 2 months into the work so I will have expenses and no funds.

Do I need to run payroll from the get go? If I wait till the company has funds is this a flag for HMRC? I was discussing with a friend and she suggested run payroll but with a report of no payment. Very feasible.

Any thoughts? as it is more what would HMRC view if I did not start payroll till the company was profitable?

[malvolio]

Hey guys,

After being away from the Outside contract world for a while am getting back into the swing again. My first client will not be paying my invoice until 2 months into the work so I will have expenses and no funds.

Do I need to run payroll from the get go? If I wait till the company has funds is this a flag for HMRC? I was discussing with a friend and she suggested run payroll but with a report of no payment. Very feasible.

Any thoughts? as it is more what would HMRC view if I did not start payroll till the company was profitable?

The world does not exist to keep HMRC happy....

The main idea of having a company is to have funds to support yourself (and the company) when you have no income. So depending on how much money is in the company, be it cleared profits from earlier work or input from Director's loans, it can decide what it does with its money. Expenses can be paid and dividends withdrawn without formally running a payroll.

But this is a question for your accountant. I'm guessing you don't have one?

[Hawkeye]

At the moment zero profits as have just started up again and am working through my checklist of vat reg, insurance, payroll, accountants, contract reviews and the list goes on.

[Maslins]

There's no difference (at least from a personal tax perspective) between registering for PAYE and doing a £nil submission vs not bothering to register for PAYE. Hence I don't really see the point of registering if you're not going to declare any salary.

It may however make sense to register as an employer, submit payroll with an actual salary for you, even if the company won't have the cash to actually pay it yet. Whilst of course this would be very dangerous for companies with what I might call "proper" employees, when the only employee is you, you're hardly going to sue yourself for non/late payment of salary. Hence you can declare the payroll, then pay it a few months later once your client's paid some invoices.

Whether that's a good idea from a personal tax perspective or not will largely depend on your earnings from earlier in the tax year. Probably one to run by your accountant.

[Hawkeye]

From an earnings perspective would be best to start my payroll in the new tax year which was also when the company had funds.

[jamesbrown]

There's no difference (at least from a personal tax perspective) between registering for PAYE and doing a £nil submission vs not bothering to register for PAYE. Hence I don't really see the point of registering if you're not going to declare any salary.

It may however make sense to register as an employer, submit payroll with an actual salary for you, even if the company won't have the cash to actually pay it yet. Whilst of course this would be very dangerous for companies with what I might call "proper" employees, when the only employee is you, you're hardly going to sue yourself for non/late payment of salary. Hence you can declare the payroll, then pay it a few months later once your client's paid some invoices.

Whether that's a good idea from a personal tax perspective or not will largely depend on your earnings from earlier in the tax year. Probably one to run by your accountant.

Director's loan to support payroll would be fine too, basically a circular activity until there's some cashflow.

[northernladuk]

From an earnings perspective would be best to start my payroll in the new tax year which was also when the company had funds.

Is getting an accountant on your list of things to do?

[Hawkeye]

Is getting an accountant on your list of things to do?

Yes it is. Have resurrected the accountant recommendations post but no responses yet.

[gregNoWorries]

No, you don't have to run a payroll from the get-go. If you wait for funds to land, this is not a flag for HMRC. There is no scenario where the HMRC will take an interest in your PAYE registration date, so long as you don't run payroll through your books without being PAYE registered