Reply to: Out of pocket expenses timing

[WordIsBond]

Still new to this so may have the wrong end of the stick but isn't the company tax year usually different to the personal tax year? i.e. in my case all of these expenses will be in the same company tax year regardless of if I claim them now or after April 6th

You are right, if your company year is different the corporation tax ramifications of taking expenses on April 6th rather than April 5th are nil.

The question that matters is when the expenses are determined to have accrued.

[Rafd]

I thought I did have a basic understanding of this - and that was my basis for questioning Scruff

[northernladuk]

Have you read the newbie links. Not understanding personal and company tax years is pretty fundamental. They are to the right -->

[Rafd]

Still new to this so may have the wrong end of the stick but isn't the company tax year usually different to the personal tax year? i.e. in my case all of these expenses will be in the same company tax year regardless of if I claim them now or after April 6th

[Scruff]

I almost resisted, but here it goes.

It's better to claim your expenses in the current tax year, since this reduces the taxable income of your company, therefore Corporation Tax. This is particularly prudent if you have incurred the expenses personally, and are going to be reimbursed for them.

A tax deferred, is a tax saved.

[SueEllen]

c) I'm waiting to see if I can announce a dividend on 6th April that is paid on 7th, 8th or 9th as the 2015/16 tax year.

When I get an answer I'll posts here.

The last date you can declare a dividend is 5th April 2016. It is deemed paid the date you declare it and do all the paper work. If you then pay it out later in the next year you need to credit it to the directors loan account but the amount needs to be £10,000 or less.

Lots of accountants don't like you declaring things later than 31st March 2016 as it seems you are trying to avoid tax.

[fidot]

c) I'm waiting to see if I can announce a dividend on 6th April that is paid on 7th, 8th or 9th as the 2015/16 tax year.

Surely that will be too late as 6th April 2016 is in the 2016/2017 tax year.

[northernladuk]

The shock of posting, saying I've asked the accountant and NLUK still has something to say on the matter....

I've looked at those links. Seems like I'm OK, but I'll see what the paid professional says.... Thanks.

Just trying be helpful... We do get a raft of the same questions at year end just like we do the entertaining ones at Xmas...

[Lance]

Doesn't this thread answer c)
http://forums.contractoruk.com/accou...d-another.html

And all these..

http://forums.contractoruk.com/accou...d-another.html

The shock of posting, saying I've asked the accountant and NLUK still has something to say on the matter....

I've looked at those links. Seems like I'm OK, but I'll see what the paid professional says.... Thanks.

[northernladuk]

I've asked my accountant the same question today. Along with a query about invoicing part way through the month, and timing of the dividend payment as it takes a couple of days to clear from Cater Allen.
One thing you don't mention is solvency. It is illegal to trade whilst insolvent, and if you owe any corporation tax or VAT then draining the company completely could break that rule.
I am going for a) work completed is a debtor, and therefore profitable, b) I do my expenses monthly so will complete at the end of the month, and c) I'm waiting to see if I can announce a dividend on 6th April that is paid on 7th, 8th or 9th as the 2015/16 tax year.

When I get an answer I'll posts here.

Doesn't this thread answer c)
http://forums.contractoruk.com/accou...d-another.html

And all these..

http://forums.contractoruk.com/accou...d-another.html

[Lance]

A quick question: As a director, is it possible and legitimate to defer claiming out of pocket expenses for a month or so? I want to maximise profit before April in order to pay max dividends possible as I am under my dividends allowance for this tax year.

I've asked my accountant the same question today. Along with a query about invoicing part way through the month, and timing of the dividend payment as it takes a couple of days to clear from Cater Allen.
One thing you don't mention is solvency. It is illegal to trade whilst insolvent, and if you owe any corporation tax or VAT then draining the company completely could break that rule.
I am going for a) work completed is a debtor, and therefore profitable, b) I do my expenses monthly so will complete at the end of the month, and c) I'm waiting to see if I can announce a dividend on 6th April that is paid on 7th, 8th or 9th as the 2015/16 tax year.

When I get an answer I'll posts here.

[ASB]

My employers policy is that they simply do not accept claims more than 90 days old. (This led to a fairly interesting conversation when I returned from Australia after a four month trip but that's a different story).

You don't give any idea of scale and how material it is. That might make a bit of a difference.....

[SueEllen]

Interesting stuff - thanks for the answers! Sounds like there is nothing stopping me from from failing to lodge the expense claims until the following month. I wonder how far backdated one could reasonably go?

If it's the odd expense because you just found a receipt then as up to the beginning of your company year - otherwise it gets messy.

If it's large amount of expenses then you are dodgy ground as you have a legal duty to have good record keeping. linky

[john@UKCA]

Accrued Expenses

Normal when completing accounts to take a look at the after year end date bank activity for items relating the previous accounting period and accrue these in the year end accounts.

It would be fairly obvious if you only had 11 month (or 3 quarters) expenses claimed in year that a year end accrual is required.

[northernladuk]

Interesting stuff - thanks for the answers! Sounds like there is nothing stopping me from from failing to lodge the expense claims until the following month. I wonder how far backdated one could reasonably go?

Until it looks like its being backdated to aggressively avoid tax or be done for a reason that can't be justified by normal business I'd guess. How long that is god only knows.

Thing is, if you start buggering about with this type of thing you attract unwanted attention and that is where you find out and it could be a very expensive way of finding out. A bit of deferral once around April maybe, using it as an active way running your business, bad idea.