Hello,
I wonder if anyone could possibly advise me on my situation below and suggest some good next steps for a bit of a PAYE pickle I have found myself in. At least, I think it's a pickle - it might not be a problem at all.
I am the sole director of a LTD company that was incorporated in June this year. Previously, I was a sole-trader, but I registered as a LTD for liability purposes once my workload began to increase. As well as my work for the LTD, I also work as a self-employed contractor for other companies in a completely unrelated industry.
The business, however, is still very small and has a modest turnover of around £30k - my annual income after expenses is roughly £15 - £18k.
I am liquidating the business at the end of December as I'm being 'bought out' by another company - so, good news!
However, I should pre-face the following by warning that I'm not very good at managing accounts, so I've got myself into a situation which I don't actually know whether it's good, bad or whether I need to do something to correct it.
When I incorporated the business, I did not register for PAYE at the time. Instead, when I needed to pay myself, what I did was simply transfer money from the LTD account to my personal account. My expectation throughout was that I would then complete my self-assessment as normal and pay the tax/NI as due on this.
Reading through some of the literature online, I now think that this is not an acceptable way to manage my accounts and may actually break several rules regarding PAYE. I didn't realise I was actually doing anything wrong.
What I want to know is what I should do now to ensure that I'm completely above-board and to make sure I pay any monies that I might owe to HMRC? As indicated previously, I never intended to avoid any payments - I just didn't realise that this wasn't an acceptable way to pay myself.
I didn't want to salary myself on PAYE as my income fluctuates so much - and also because my turnover is so small it didn't make sense to invest significant amounts of time and energy into a PAYE system when I am the only person involved with the business.
So, what should I do?
Should I call HMRC and be honest and say I think I've messed up - and how can I remedy this and ensure I've paid everything I need to? Are they likely to be sympathetic or could I be fined? It was an honest mistake and I don't really want to be fined given my income is so low.
Is there a way of retrospectively giving legitimacy to my payments to myself? I have paid myself about 15 times since incorporation - can I go back and issue dividend certificates for each of these transfers? Or is it not possible to issue dividends without also having PAYE?
What should I do to make sure I'm not breaking any rules?
Alternatively, I've read about the concept of a Director's Loan Account. Could I class these payments from the LTD to me as part of the DLA and then 'write these off' (as per http://www.hmrc.gov.uk/paye/exb/a-z/...t-director.htm) and register for PAYE and pay NI/tax on this in that way instead?
Once again, I really didn't mean to manage my accounts this way - I just didn't realise it was not the correct way to do things and I've always been used to doing things like a 'self-employed' person. I would happily pass this over to an accountant to see if they can sort it - but again I don't want them to come back with a bill for thousands!
Any help would be gratefully received - as far as I can see there are several ways of doing things, but I want to make sure I correct any errors I've made and do things the 'proper way' from now on.
Thank you.
I wonder if anyone could possibly advise me on my situation below and suggest some good next steps for a bit of a PAYE pickle I have found myself in. At least, I think it's a pickle - it might not be a problem at all.
I am the sole director of a LTD company that was incorporated in June this year. Previously, I was a sole-trader, but I registered as a LTD for liability purposes once my workload began to increase. As well as my work for the LTD, I also work as a self-employed contractor for other companies in a completely unrelated industry.
The business, however, is still very small and has a modest turnover of around £30k - my annual income after expenses is roughly £15 - £18k.
I am liquidating the business at the end of December as I'm being 'bought out' by another company - so, good news!
However, I should pre-face the following by warning that I'm not very good at managing accounts, so I've got myself into a situation which I don't actually know whether it's good, bad or whether I need to do something to correct it.
When I incorporated the business, I did not register for PAYE at the time. Instead, when I needed to pay myself, what I did was simply transfer money from the LTD account to my personal account. My expectation throughout was that I would then complete my self-assessment as normal and pay the tax/NI as due on this.
Reading through some of the literature online, I now think that this is not an acceptable way to manage my accounts and may actually break several rules regarding PAYE. I didn't realise I was actually doing anything wrong.
What I want to know is what I should do now to ensure that I'm completely above-board and to make sure I pay any monies that I might owe to HMRC? As indicated previously, I never intended to avoid any payments - I just didn't realise that this wasn't an acceptable way to pay myself.
I didn't want to salary myself on PAYE as my income fluctuates so much - and also because my turnover is so small it didn't make sense to invest significant amounts of time and energy into a PAYE system when I am the only person involved with the business.
So, what should I do?
Should I call HMRC and be honest and say I think I've messed up - and how can I remedy this and ensure I've paid everything I need to? Are they likely to be sympathetic or could I be fined? It was an honest mistake and I don't really want to be fined given my income is so low.
Is there a way of retrospectively giving legitimacy to my payments to myself? I have paid myself about 15 times since incorporation - can I go back and issue dividend certificates for each of these transfers? Or is it not possible to issue dividends without also having PAYE?
What should I do to make sure I'm not breaking any rules?
Alternatively, I've read about the concept of a Director's Loan Account. Could I class these payments from the LTD to me as part of the DLA and then 'write these off' (as per http://www.hmrc.gov.uk/paye/exb/a-z/...t-director.htm) and register for PAYE and pay NI/tax on this in that way instead?
Once again, I really didn't mean to manage my accounts this way - I just didn't realise it was not the correct way to do things and I've always been used to doing things like a 'self-employed' person. I would happily pass this over to an accountant to see if they can sort it - but again I don't want them to come back with a bill for thousands!
Any help would be gratefully received - as far as I can see there are several ways of doing things, but I want to make sure I correct any errors I've made and do things the 'proper way' from now on.
Thank you.
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