PAYE on bonus - is this correct?

[ASB]

I see why you want to do it.

I believe its fine. The thing to be cautious of will be if shareholders funds happen to go negative as a result. There is a trading while insolvent argument that could then be made.

Ultimately the bonus will mean you make a trading loss in one year. Big deal happens all the time. If you are then able to carry back the loss against previous ct so be it. You will need to check carry back is still available. It would get complex if it had to be carry forward.

[IR35 Avoider]

It looks like this is resolved now. There were misunderstandings on both sides. They thought I was going to cease my directorship before the end of the tax year. I thought they were using a monthly earnings period for NI, but NI is not the issue, their figures for that are the same as mine.

They have discussed with HMRC, and apparently, for income tax, you are supposed to specify your period in advance, and if you specified monthly, then once a monthly payslip has been produced, you cannot change from using a monthly period. This is not new, however before RTI HMRC would not have known if you'd changed your mind in the first quarter of the tax year, because salary was only reported quarterly.

However tax was never the issue, as with tax you can reclaim any amounts that have been overpaid. It's NI where if you don't have an annual earnings period then the amount of tax you pay on the same amount of income can go up or down depending on how the payments are distributed.

So I could just pay bigger than expected deductions and reclaim the income tax later.

However there is an alternate solution, and that is simply to put an entry in the accounts now for the salary, but only actually pay it at a later date. If I paid it in equal monthly instalments over the rest of the tax year, or all in March 2014, there would be no over-deduction of income tax and no need to reclaim. Apparently this is allowable from an accounting point of view since the accrual relates to work done during the year in question. There is a HMRC rule that to be deductible the related salary has to be actually paid before the corporation tax return is filed and before the company accounts are filed. That is not a problem if the salary is taken by the end of March 2014.

[northernladuk]

Now that is resolved are you gonna change your name to 'Failed IR35 Avoider' or summat now?