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Previously on "Advice on my low earnings situation"

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  • GezHells
    replied
    Thanks, understood. Yes, as you suggested, I was considering using spare company cash to pay myself but I realise I can't do that for too long.

    I'm hoping that by the new year (or not long after) things will be back to normal. If not, I shall have to consider closing the company - which is another question for another day!

    I just wanted to check that there was nothing actually wrong with my plan, before I stopped paying myself.

    Leave a comment:


  • Scruff
    replied
    There isn't really anything wrong making an assessed loss, if YourCo. has the cashflow to continue paying your salary.

    Be careful about operating in an insolvent position, where your liabilities exceed your assets, unless you have a "going concern", with a reasonable potential for continued Turnover and thus operating income. If YourCo has an overdraft, it's most likely that the Bank will have made you sign a personal surety.

    Quick exit...

    Leave a comment:


  • northernladuk
    replied
    Originally posted by GezHells View Post
    Thanks for the reply. May I ask why that would be such a bad thing? I'm really not sure of the consequences of operating at a loss, hence my original question.
    You'll make the money to pay it back when? If nothing changes are you going to pay yourself again, and again until the company cannot meet it's legal obligations? Using spare company money to prop yourself up is a very slippery slope.

    If you can't pay your taxes at the end of the period you've got investigations and penalties to think about.

    If it goes on too long you could be trading insolvent which is pretty serious.

    Probably painting the worst case but if there is a chance you are considering operating at a loss it would be wise to get up to speed with the consequences.

    But all that said you've decided to stop paying yourself before it happens so shouldn't be a problem.

    Leave a comment:


  • GezHells
    replied
    Originally posted by northernladuk View Post
    I don't see you have any other option. Moving in to a loss in your situation sounds like a disaster waiting to happen.
    Thanks for the reply. May I ask why that would be such a bad thing? I'm really not sure of the consequences of operating at a loss, hence my original question.

    Leave a comment:


  • northernladuk
    replied
    I don't see you have any other option. Moving in to a loss in your situation sounds like a disaster waiting to happen. I don't think the accounting is really going to be your main concern once you start paying yourself at a loss so it seems a very sensible way forward.

    We've often seen contractors come on here who have splurged the CT and VAT they should be putting to one side because they can pay it with the last 2 month income from the year and then get canned mid year. I've seen a grown man in tears when he got his notice in this position. Didn't get much sympathy from the rest of the guys on site when he can't pay his CT and VAT.

    Leave a comment:


  • GezHells
    started a topic Advice on my low earnings situation

    Advice on my low earnings situation

    Hi all, I'd appreciate some advice on my current situation.

    I operate as a one man limited company, implementing the fairly standard method of a salary up to the Primary Threshold (i.e. around £8.5k) and dividends when appropriate.

    Due to personal circumstances, over the last two years my income has been very limited - in 2017 I made a small profit, and in 2018 I just about broke even. My financial situation has been so straightforward that I decided against using an accountant and have filed my own accounts as a micro entity - partly to save costs, but also because I have the time and have found it an interesting experience.

    This year, so far I earned around £6.5k, and unless anything dramatically changes before xmas, that may well be it for the year. My monthly salary payments up until September take me up to around the same amount, meaning that I will just be in profit at this point. If I pay myself next month, I would then be operating at a loss.

    So, I figured the best thing to do is to stop paying myself until the end of the year. Firstly, I've reached the Lower Earnings Limit (LEL of £6136) which is important for NI. Secondly, as I submit my own accounts and want things to be as simple as possible, it's better to be operating as a profit, rather than at a loss, which I can only assume would be a lot more complex for me to handle without an accountant.

    How do my assumptions sound to you? Do you think this is the best way forward, or is there anything fundamentally wrong with this which you would advise against? Of course, I'm hoping that next year things will improve and get back to normal, i.e. operating at a profit!

    Thanks in advance.

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