Paying salary from retained money

[xoggoth]

Unless something really interesting turns up I am now retired from contracting. Have a few k still in company account and was planning to keep this year's state pension entitlement going by paying small amount of salary.

But unlike dividend, salary is deductible from profit and if I don't have any earnings this year will take the company into loss situation. By simply calling it salary instead of dividend I would then be able to claim some CT from last year while payiing little or no tax/NI at that salary level. Sounds dodgy so I am wondering if there are special rules or HMRC practices governing payment of salary from retained earnings.

Cheers.

[BA to the Stars]

Surely the retained money is from profit so why not pay as a dividend or as it will it be in a different financial year where no trading has taken place count?

[TheFaQQer]

Surely the retained money is from profit so why not pay as a dividend or as it will it be in a different financial year where no trading has taken place count?

Because he wants to pay NI on it, so it needs to be salary.

Don't see why this years loss can't be offset against last years retained profit though. Maybe HMRC will owe you some money at the end of the year if you do it that way...

[ASB]

Xoggoth,

I guess your objective is to pay 52100, make 5200 loss and then carry this back tyo last year in order to get relief against the CT paid last year?

This may help:-

http://www.hmrc.gov.uk/manuals/bimmanual/BIM75205.htm
http://www.hmrc.gov.uk/manuals/ctmanual/CTM92240.htm

I don't know whether you can relief if you situation. If you don't have an accountant the tax office helpline are usually helpful.

[oraclesmith]

Because the salary is an overhead, you can happily pay it out this year and offset last years losses against it. There is a limit as to how many years you can do this though, so best get your accountant to help. You get any corporation tax back which you overpaid last year. That's my opinion anyhow.

[xoggoth]

Exactly ASB. Cheers for all comments so far.