After 3 years accounts... what to do?

[SueEllen]

wow, I'm confused now?!?!

See there's something else here too, this might warrant another thread but here goes.

The insurance folks asked if I was working 16 hrs per week.

What did you put down as your occupations?

If you put that you are a company director as well as what other job you do then yes you are.

That is because as a company director you will be trying to get a new contract for your business and this should take you about 16 hours a week. Remember you are running a company not just an employee of that company and that has other responsibilities.

Is there a way we could do something similar when out of contract? Trouble is, my war chest is rather large and I'd fail the means testing.

No one on here understands how you have been paying yourself.

The normal way for small companies is that directors take the minimum to get NI contributions paid for them, then the rest is made up in dividends if the company has the reserves to pay dividends.


If your accountant is around they would advise you to withdraw the minimum from your reserves (war chest) i.e. salary, until you have to go down the route of claiming benefits because your company has limited funds.

The people who work the benefit systems can do so because:
1. They have a number of children that have to be provided for
2. They only work up to 16 hours a week on minimum wage
3. They don't run companies with reserves
4. They don't have any other significant savings

[Mr.Whippy]

my war chest is rather large and I'd fail the means testing.

Isn't that the point of "means testing" though? You seem to have the means to survive without help..... so why don't you use your "rather large warchest"? After all, isn't that the point of putting money by?

[contractor79]

wow, I'm confused now?!?!

See there's something else here too, this might warrant another thread but here goes.

The insurance folks asked if I was working 16 hrs per week.

Then I read about that muslim cleric choudhary who the sun said got £25k worth of benefits because he was employed on a shoestring by a muslim organisation but then claimed income support, child benefit, council tax benefit etc.

Is there a way we could do something similar when out of contract? Trouble is, my war chest is rather large and I'd fail the means testing.

[Robot]

Eh!? Change your accountants quickly! They should have you drawing a low salary to ensure you get your NI Credits etc. Living on dividends only isnt a good way forward.

And even if you arent drawing a salary, you are still employed by your co.

Don't change your accountant ... yet, ask the question. I don't know anything about your circumstances but perhaps you have already paid enough salary in the current year to gain the NI credits, so stopping the salary might have been a good idea and saved you tax and NI.

Was your P45 figure over £5,720, if yes, I think the accountant (from a tax point of view) has done well for you.

Did the accountant say, get a P45 and then claim JSA, again not a bad idea, ignoring the sickness protection thing.

Robot

[BolshieBastard]

update- my accountant advised me a few months ago to stop paying myself a salary and only dividends, for tax purposes. So they gave me a P45. But to quality for accident and sickness insurance for mortgage protection I need to have been continuously employed for the last 6 months. Can I reinstate my salary, I wonder, so that it appears there was no gap?

Eh!? Change your accountants quickly! They should have you drawing a low salary to ensure you get your NI Credits etc. Living on dividends only isnt a good way forward.

And even if you arent drawing a salary, you are still employed by your co.

[BolshieBastard]

Hi- I have 3 years accounts now for my limited company which are pretty good however I am now out of contract and fear this could be the case for another few months as I'm more particular now about the next contract and can live off warchest for a while... should I just keep my company as dormant or just close it and open another one up when I get a new contract? I have recently been able to borrow money for me personally based on my company account figures... is there any need for this company anymore or is it best I keep it going even if there's no income to it for a couple of months just to avoid awkward questions if people want to see results in future?!

To many people get confused over a dormant company and one that's just got no income at present. Your co is not dormant, it just has no source of income right now.

A dormant co is more likely one that has effectively ceased trading and exists mainly to reserve its name on the Companies register or other reasons.

That said, its often a good idea to close your co down every 3 - 4 years to limit any exposure to IR35.

Before closing your co though, make sure you have secured any personal loans you may want such as car finance or mortgage etc as some places may be reluctant to give you a loan when you tell them you have no current employer.

Even if you immediately start up a new co, generally, only that new co's trading position will be taken into consideration meaning you could end up paying a higher rate of interest.

[contractor79]

update- my accountant advised me a few months ago to stop paying myself a salary and only dividends, for tax purposes. So they gave me a P45. But to quality for accident and sickness insurance for mortgage protection I need to have been continuously employed for the last 6 months. Can I reinstate my salary, I wonder, so that it appears there was no gap?

[contractor79]

It is annoying if you want to get a mortgage to have a year where not much profit is made as it reduces your "salary" for multiples calculation with some lenders.

But many lenders don't give a tulip so I wouldn't worry too much.

This is why I took out a remortgage recently. A year out of work would make my numbers look bad for when I really needed the cash. So now I took £thousands out against my property which is just sitting in my bank account and I pay a little back each month over 25 years. In a year's time if still out of work I'm glad I did this. I call it being one step ahead of the game. When you really need to borrow money no one lends to you, remember that.

This leads me onto my next question- income protection insurance. I did have one but when I told them I was out of contract they said if I don't work then I'm not covered even if I pay the premiums so I suspended the premiums until I get my next job. However this means that when not working on a contract I am living off my war-chest and no protection if God-forbid I had an accident and could not work again. If that happened then my war-chest would be run to the ground then I'd have to look at getting benefits? Not much. And probably lose my home? Not a good time to get an accident.

[XLMonkey]

If:

you are actively looking for another contract, then you should probably keep the company open (3 years accounts with a blip is better than a new company with no year's accounts)

But if:
you are expecting not to be in contract for a while, then you may want to wind the company up and take advantage of entrepreneur's relief (allows to you to withdraw the remaining money in the company as a capital gain, and avoid income tax on it). You could establish a new company if you decided to go back into contracting at a later date.

(there's various rules on this one that your accountant will need to advise on, but it may be an option in your circumstances)

[Moscow Mule]

It is annoying if you want to get a mortgage to have a year where not much profit is made as it reduces your "salary" for multiples calculation with some lenders.

But many lenders don't give a tulip so I wouldn't worry too much.

[xoggoth]

If there is no new income or expenses not much to doing the accounts and other legal requirements yourself and not much potential to get it wrong. Filling in HMRC stuff with lots of 0s is great fun. Only real annual cost is £15 co hse fees.

Closing would be a hastle, dealing with assets, final accounts, get approved by HMRC, closing bank, dereg PAYE, VAT. Then starting a new company at £35+, new bank account, re-registering for VAT, PAYE etc etc.

I would be inclined to keep it open.

PS Ah loans!

[northernladuk]

Why move it to dormant for such a short period of time? You are still a company director and are still paying yourself. The fact you are not making a fat profit every month doesn't mean you cease to be. Many companies are making huge loses so the fact your making 0 seems pretty good in this environment.

Be optimistic and tell yourself another contract is only hours away and just keep the status quo as is for a couple of weeks to re-asses?

[contractor79]

Hi- I have 3 years accounts now for my limited company which are pretty good however I am now out of contract and fear this could be the case for another few months as I'm more particular now about the next contract and can live off warchest for a while... should I just keep my company as dormant or just close it and open another one up when I get a new contract? I have recently been able to borrow money for me personally based on my company account figures... is there any need for this company anymore or is it best I keep it going even if there's no income to it for a couple of months just to avoid awkward questions if people want to see results in future?!