Probably not legal...but

[techno]

I know the title sounds like another n00b question who deserves to be but I was thinking about this scenario last night...

All figures rounded up for ease of calculations...

For the first 3 months of financial year I invoice client £10,000 + VAT and pay myself £500 per month.

At the end of the quarter I pay the VAT man his full money (not flat rate or anything).

If nothing else went through the books for the year then...

Invoiced £10,000
Payroll £1,500
Profit £8,500
Corp Tax £1,700 (assuming 20%)

If however I lent £500 (from my savings) into the company in month 4 to cover the wages then it changes to...

Invoiced £10,000
Payroll £2,000
Profit £8,000
Corp Tax £1,600 (assuming 20%)

however all I have done is lent the company £500 to pay me £500 but reduced the tax bill.

Is this allowed/right/wrong/indifferent, and if so as I have lent the company £500 does this go into the directors loan account (but as a debt to me rather than a loan to me).

[Clare@InTouch]

You don't need to lend the company any money to achieve that effect, just add on £500 to wages and show it as owed to you, thus creating a directors' current account.

It's perfectly legal as all you're doing is increasing the wages being paid through the company but not actually paying them to yourself.

[xchaotic]

Also, if you paid yourself more via payroll, then HMRC won't mind, as probably you'll end up paying more tax in the end (personal income + NHS vs just CGT).
so all you're doing is shifting tax burden from your Ltd to you as a person.
In the process it might mean that you'll pay the taxes a bit later, but at least with the current levels it doesn't strike me as particularly beneficial to yourself.

If I'm not mistaken, the only case where it would benefit you is when you end up paying yourself less than 8k a year (6.5k salary + 1.5k divs).... but then again, only temporarily...