Reply to: Am I in deep doo-doo?

[TheCyclingProgrammer]

Whilst I agree with that (and it's absolutely correct, given the current legislation), it might be worth noting that HMRC's guidance is that you need to complete a self assessment because you are a director. So be prepared to argue / show / get them to try to prove that is correct - their guidance is not correct, you do not have to complete one just because you are a director, unless HMRC ask you to complete one.

No doubt with MTD this will all become simple.

Whilst this is true, it only means HMRC are more likely to send a notice to file at some point and probably won’t withdraw it even if no tax is owed. At the point it’s probably easier to just do it than argue with HMRC.

They can’t be penalised for failing to notify because failure to notify penalties are always based on the tax not declared, in this case zero.

So yes, expect a notice at some point but still nothing to actually worry about.

When OP starts taking more dividends they will inevitably have to registered anyway.

[TheFaQQer]

Let’s start with easy one. If, since you started your Ltd co, you’ve taken nothing more than expenses, salary and dividends within the personal allowance and dividend allowance and as such are not liable to pay any income tax then you have no obligation to notify HMRC or register for self assessment, so stop worrying about that. You have a legal obligation to notify HMRC when you become chargeable to tax.

Whilst I agree with that (and it's absolutely correct, given the current legislation), it might be worth noting that HMRC's guidance is that you need to complete a self assessment because you are a director. So be prepared to argue / show / get them to try to prove that is correct - their guidance is not correct, you do not have to complete one just because you are a director, unless HMRC ask you to complete one.

No doubt with MTD this will all become simple.

[gazelle]

So many questions.

Let’s start with easy one. If, since you started your Ltd co, you’ve taken nothing more than expenses, salary and dividends within the personal allowance and dividend allowance and as such are not liable to pay any income tax then you have no obligation to notify HMRC or register for self assessment, so stop worrying about that. You have a legal obligation to notify HMRC when you become chargeable to tax.

Hi Mate,

Thanks very much for the info - this has put my mind at rest!

I’m assuming of course that HMRC haven’t sent you a notice to file a tax return for any year? If they send you a notice you’ll have to complete it.

No, I haven't received a notice to file.

Second thing, it’s possible to pay yourself a salary if you have no other job and are only earning up to the LEL without PAYE. Otherwise you should be operating PAYE.

Yes it seems like you should have been paying yourself dividends to at least use up any allowances you have assuming you have sufficient profits. You should have a serious conversation with your accountant about whether or not you are being tax efficient. If you aren’t happy with your accountant’s advice then get a new accountant.

Finally if you’re still in the same contract and are claiming travel expenses make sure you’re familiar with the 24 month rule.

I was relying on the accountant to tell me what I need to do - He did the Corp Tax return then after that he didn't mention anything about declaring dividends.
Yes, I'm going to have a proper conversation with him - at least now I feel I'm going fully prepared with knowledge and reassurance, I'm getting all my questions together, and try and get this sorted.

[Chris@Intouch]

In order for any amount to be treated as a salary it needs to have been submitted via PAYE. In other words the £8,000 cannot be recognised as a "salary" unless a payroll scheme is set up for your company.
With the self assessment situation, if you haven't registered for a self assessment then HMRC will not have issued you a return. If you register properly now HMRC will give you some time to complete the necessary returns. However, unfortunately, if HMRC determine a SATR is due for the 2015/16 tax year then you are likely to receive a penalty for this, however they are likely to extend the filing deadline for the 2016/17 return.
If your wife is providing a service to the company then she can be entitled to receive a salary. Also under an exemption in the settlements legislation you can transfer shares to your wife who could then also maximise her tax free dividend allowance and basic rate band as appropriate.
In answer to your question about the pension, yes a salary over the lower earnings limit is a qualifying year for state benefits. HMRC will pick this up themselves through the payroll submissions discussed in my first point.

[unixman]

Hi OP, as others have said most of this should be sorted by the accountant. If I can offer a bit of general advice:

- Slow down. Way down.
- Just look at one issue at a time
- Sort it out by working with your accountant
- When it is all resolved, move on to the next issue.

Running a company means that legally, you have to perform certain duties every year, by certain dates in that year. A good accountant will remind you of each date well in time and tell you exactly what to do (as Intouch does for me). Some of the dates relate to the UK tax year which starts every April 6th. Other dates relate to your company year, whose start date depends on the month your company was formed. Learn all of these dates and write them down.

Running a company is regarded as a privilege, and the duties above (eg. submitting annual accounts) are what goes with it. In the future, don't let any of them slip, not a single one. It seems complicated in the first year or 2 but is simlple, after that, as you are just doing the same thing every year.

[TheCyclingProgrammer]

So many questions.

Let’s start with easy one. If, since you started your Ltd co, you’ve taken nothing more than expenses, salary and dividends within the personal allowance and dividend allowance and as such are not liable to pay any income tax then you have no obligation to notify HMRC or register for self assessment, so stop worrying about that. You have a legal obligation to notify HMRC when you become chargeable to tax.

I’m assuming of course that HMRC haven’t sent you a notice to file a tax return for any year? If they send you a notice you’ll have to complete it.

Second thing, it’s possible to pay yourself a salary if you have no other job and are only earning up to the LEL without PAYE. Otherwise you should be operating PAYE.

Yes it seems like you should have been paying yourself dividends to at least use up any allowances you have assuming you have sufficient profits. You should have a serious conversation with your accountant about whether or not you are being tax efficient. If you aren’t happy with your accountant’s advice then get a new accountant.

Finally if you’re still in the same contract and are claiming travel expenses make sure you’re familiar with the 24 month rule.

[craigy1874]

Exactly Maslins.

The best advice I can give you is go and see an experience accountant. Provide them with all of the information you have and they will need.

They can and will sort this out. I have sorted out messes a lot worse than this in my time!

Forget about 31st Jan, if you end up with a late filing penalty of £100 so be it. You are better to file a late accurate return than an on time return full of errors.

[Maslins]

I'll try and talk my accountant again, I was a bit worried talking to him to be honest, if I had done something wrong, I think accountants are legally obliged to fill a SAR and he might land me right in it - so I've been quite reluctant to talk to him. Cue stress! Hence why I'm here - trying to find out if I'm in trouble (hopefully somewhat anonymously).

If you use an accountant to try to do things by the book, then there's zero risk of them filing an SAR on you. If you lie to your accountant, or deliberately withhold information from them, and they get suspicious, then they might file an SAR on you.

So assuming you're not trying to defraud anyone, your accountant is there to help you, not dob you in.

[l35kee]

My life seems to revolve around putting out one crisis and then 2 more pop-up.

Get a hold of your life. Seriously. Sticking your head into the sand makes everything 10x worse when it eventually hits. No excuses like crisis just always happens to me, or that you're scared. If you're an adult you can handle this tulip.

[gazelle]

Are you in deep doo-doo

No, not by a long long way

Any accountant will clear this up in seconds

Would hate to see your panic in a real emergency

Wow, thank you, just reading this has given me some relief and bought down my stress levels.
I can handle the pressure for all things IT - for anything else, I fall to bits and end up doing what ostriches do best.

My life seems to revolve around putting out one crisis and then 2 more pop-up.
I'm trying to focus on this now and trying to get this under control and into some sort of routine.

I'll try and talk my accountant again, I was a bit worried talking to him to be honest, if I had done something wrong, I think accountants are legally obliged to fill a SAR and he might land me right in it - so I've been quite reluctant to talk to him. Cue stress! Hence why I'm here - trying to find out if I'm in trouble (hopefully somewhat anonymously).

[tarbera]

Are you in deep doo-doo

No, not by a long long way

Any accountant will clear this up in seconds

Would hate to see your panic in a real emergency

[cojak]

Accountants will be able to give you information tomorrow, but I would consider moving accountants after this issue is fixed.

And take an active interest in your business, otherwise join an umbrella company.

[northernladuk]

Concentrating on contracting is running your business properly.

[gazelle]

I was just hoping to get some second opinions from some seasoned contractors - apologies for the many questions - just trying to make sense of it all and how to get back on to the right track.

The main question is around SA - do I need to register given my circumstances and pay the penalty or am I ok not to given that no tax is payable?

[jmo21]

50 questions to internet strangers, but you don't trust your accountant who you are paying?