Declaring Profit

[Weltchy]

Hi guys,

This question was triggered by an earlier thread (which I can't find & am too lazy to search for). Basically, the question relates to the following example and how to declare a profit. Just after confirmation of the following.

Account Balance = £10000
Money owed to Creditors (Taxman) = £10000
Money owed by Debtors (Invoiced Week) = £3000
Invoice Payment = £3000
Expense Payment = -£1000

In the above situation, the company could declare a profit of £5000 and issue dividends of £4000 if it so desired, due to the money owed by the Debtor.

However, if the Debtor was removed, the potential maximum declared profit would drop down to £2000.

Following on from this, the only way you could then extract money from the company (Excluding Salary) would be to use a directors loan, the receiver of which would then become a debtor of the company.

In order to avoid BIK, the amount of the loan must fall under £5000 to qualify as a directors loan, or if over £5000 must have a commercial rate of interest applied to it, say 6%.

[Bluebird]

Hi guys,

This question was triggered by an earlier thread (which I can't find & am too lazy to search for). Basically, the question relates to the following example and how to declare a profit. Just after confirmation of the following.

Account Balance = £10000
Money owed to Creditors (Taxman) = £10000
Money owed by Debtors (Invoiced Week) = £3000
Invoice Payment = £3000
Expense Payment = -£1000

In the above situation, the company could declare a profit of £5000 and issue dividends of £4000 if it so desired, due to the money owed by the Debtor.

However, if the Debtor was removed, the potential maximum declared profit would drop down to £2000.

Following on from this, the only way you could then extract money from the company (Excluding Salary) would be to use a directors loan, the receiver of which would then become a debtor of the company.

In order to avoid BIK, the amount of the loan must fall under £5000 to qualify as a directors loan, or if over £5000 must have a commercial rate of interest applied to it, say 6%.

has the taxman actually invoiced you or have you actually decalred the amount that is due yet - or is it just a calculation of what you think will be due ?

[Weltchy]

The Taxman bit breaks down roughly to

PAYE / NI - Amount due on the 19th of whatever month we're in, lets say £200

VAT - Amount due by direct debit on quarterly basis of say £3000

Corporation Tax - Retained in savings account of around £7000, but will not be due until CT form is completed and sent in.

[Bluebird]

The Taxman bit breaks down roughly to

PAYE / NI - Amount due on the 19th of whatever month we're in, lets say £200

VAT - Amount due by direct debit on quarterly basis of say £3000

Corporation Tax - Retained in savings account of around £7000, but will not be due until CT form is completed and sent in.

what I was trying to say is you can use money you "earmarked" for taxes providing :

1. Payment is not sue yet and
2. More money will be in the b/acc by the time it is due

[Weltchy]

I figured that might be what you were saying. Cheers.