Filling in the blanks between invoices and Child Support payments

[mouseorgan]

Say I have a monthly invoice bringing in £10k plus VAT to my limited company. I need to take this initial income and other information that becomes relevant along the way and turn it into a figure that honestly reflects 25% of my personal income, the supposed standard figure used to calculate child benefit payments to a primary carer (i.e. my ex wife).

Knocking off CT, expenses and the likes, I've previously said that well, that leaves about £6k, so I've been paying her £1500 a month. However, I don't personally take £6k a month. I've got monthly outgoings more about say, £2k to £2.5k. So the other £4k or so... that's NOT my earnings right? If I go and wrecklessly blow an additional £15k on a conservatory and kitchen, well then I'll "earn" that money in a dividend and so be it - it will be reflected in that years self assessment and it's clearly visible. But all the time I'm not taking that money, and it stays in my business account, it surely doesn't actually matter what my company is bringing in that I could have *in theory* right? Clearly there's a view of averages and the likes,

She will need a steady reliable set amount etc, not live by the actual dividends I earn as and when I draw them, but when I talk about the amount I'm giving her at present, most peoples jaws hit the floor - contractors and "normal" people alikes.

Thanks

[kingcook]

1) The £10K belongs to your business.
2) The + VAT belongs to the tax man.
3) Your personal income is your salary + and dividends you take.

My guess is that you only need to use (3) when calculating CSA payments.

Perhaps give a %age of your salary (which will be fixed), and let CSA know that your dividends change from year to year?

Keep it simple.

[northernladuk]

Firstly where is your warchest in all this?

Secondly child support seems a complex area and we have a couple of posters in similar situations. Have a look at the results of this search and see if any of the other posts either help or give you ideas...

https://www.google.co.uk/search?q=cs...hrome&ie=UTF-8

I seem to remember she can ask for your limited assets or retained profits to be taken in to account but I could be wrong. It has been discussed so you should find the answer. I don't think storing the money in your LTD is a safe bet.

[Zippy]

Sorry if this seems obvious, but what does your ex-wife think? Is she happy with a steady £1500 per month (she must know how ltd cos work re warchests etc.)? Do you have to take the CSA route?

[Swamp Thing]

[QUOTE=northernladuk;1733295]Firstly where is your warchest in all this?/QUOTE]
NL, do you mean warchests should be off-limits, or should be automatically taken into account by CSA? It’s been a while since I looked at this viz my own situation. I also heard that from next year the CSA calc basis switches to a % of company turnover (if you’re a ltd). So I assume there will be no hiding place for warchest/contingencies for new cases settled after next year..

[BA to the Stars]

Go on to the CSA website and use their calculator to work out what you should be paying.

At the moment it is not based on your Ltd Co's income - that is a seperate legal entity and besides there will be some Companies where there is more than 1 shareholder.

Also, 25% is the maximum - if you are making payments into a pension personally, that is deductable, if you are co-habiting with someone who has dependant children, that is also taken into account.

Without knowing the full financial circumstances of you both I would think that "ex" is probably pretty happy with a £1,500pm income as she probably wouldn't get anything extra from the CSA and may not want to stir things up as there is a greater chance of a reduction.

Cold financials aside, try to reach an amicable solution - after all the most important person in this is your child.

[northernladuk]

Firstly where is your warchest in all this?

NL, do you mean warchests should be off-limits, or should be automatically taken into account by CSA? It’s been a while since I looked at this viz my own situation. I also heard that from next year the CSA calc basis switches to a % of company turnover (if you’re a ltd). So I assume there will be no hiding place for warchest/contingencies for new cases settled after next year..

Ah no, just the comment he made 'So the other £4k or so... that's NOT my earnings right?' I thought he was thinking the £4k was safe in his business but pointing out (completely off topic) he should have a lot more than that in the form of a warchest. That is all. Shouldn't have asked really so as not to avoid confusion.

[mouseorgan]

Firstly where is your warchest in all this?

it's... kind of no where... I'm having to take extra dividends to pay her, and also gave her £10k when she moved out. I have very little savings after CT and VAT is put aside. She decided to move into a rental property for £800pcm, £200 more than she could have had a nice enough place for.... As she's not earning, if I reduce that she will struggle. And of course, she wouldn't be exactly happy either!

I seem to remember she can ask for your limited assets or retained profits to be taken in to account but I could be wrong. It has been discussed so you should find the answer. I don't think storing the money in your LTD is a safe bet.

I'm not looking to hide money, just get a fair deal for everyone involved.

1) The £10K belongs to your business.
2) The + VAT belongs to the tax man.
3) Your personal income is your salary + and dividends you take.

My guess is that you only need to use (3) when calculating CSA payments.

Perhaps give a %age of your salary (which will be fixed), and let CSA know that your dividends change from year to year?

Keep it simple.

Simple? as I take a minimal salary, that's not worth a whole heap compared to either what I invoice for or live on. Hopefully it'll stay a CSA free zone, but as I only take dividends as and when I need to in as large a lump as I can, typically £10k every few months, that's very hard to annualise into a yearly income, as we all know.

Sorry if this seems obvious, but what does your ex-wife think? Is she happy with a steady £1500 per month (she must know how ltd cos work re warchests etc.)? Do you have to take the CSA route?

She thinks I should be giving her a LOT more. You'd think someone not working, but having a tax free income of £1900 PCM, when Child Benefit is added would be pretty chuffing happy with that huh? :-s She knows how much I earn a day, and that's the only figure she really cares about. She deliberately chose not to learn anything about the tax system as she wanted me to do something for myself. Warchests don't mater to her, she just sees it as me being devious.

At the moment it is not based on your Ltd Co's income - that is a seperate legal entity and besides there will be some Companies where there is more than 1 shareholder.

What do you mean by "at the moment"? is that from a tax law perspective or my own situation?

Also, 25% is the maximum - if you are making payments into a pension personally, that is deductable, if you are co-habiting with someone who has dependant children, that is also taken into account.

Without knowing the full financial circumstances of you both I would think that "ex" is probably pretty happy with a £1,500pm income as she probably wouldn't get anything extra from the CSA and may not want to stir things up as there is a greater chance of a reduction.

25% was what a solicitor said was normal. I'd looked at online calculators taking into account how many nights you had the kids etc., and she just ignored all that and said 1/4. Just not sure what it should be 1/4 of right now. I thought pensions didn't really matter, but I have very recently started a company pension and got a decent sum in before April.

You'd think she'd be happy, huh? above the national average salary! Nope! Muggins here even also paid her car insurance for her this year...

Cold financials aside, try to reach an amicable solution - after all the most important person in this is your child.

We are very amicable now though, hopefully that'll continue. Fingers crossed.

[kingcook]

She knows how much I earn a day, and that's the only figure she really cares about. She deliberately chose not to learn anything about the tax system as she wanted me to do something for myself. Warchests don't mater to her, she just sees it as me being devious.

She knows how much your limited company currently earns per day. This is not the same as what you take home.

As someone else has mentioned, your limited company is a seperate legal entity. Don't bring it's earnings into this.

Your limited company will have expenses to pay, such as travel and possibly accomodation for it's director (you), office equipment, web hosting, etc.

It also has a corporation tax bill to pay at the end of the year.

Do not let your ex dictate to you how you run your company.

When I said "keep it simple", I meant that just your salary and dividends are your income. Nothing more. Dividends will be different every year, so perhaps make an educated guess on what you will be taking.

As for your warchest - you need to keep money in the company to pay your salary/dividends in the future during those times when your limited company has no income (between contracts). Your warchest is kept in the limited company bank accounts, so it is your limited company's money - not yours (yet).