Reply to: No Salary for accounts

[Jessica@WhiteFieldTax]

Every single client of ours pays monthly and we submit RTI monthly for them. I believe SJD had an annual option.....?

Likewise, all monthly. The theoretical saving from moving to annual payment would have brought a whole host of other issues; it was easier to invest in staff and systems instead.

[Jessica@WhiteFieldTax]

Could you confirm my understanding here, you're basically having an annual salary processed this month (March) for the whole of the tax year instead of a monthly salary split evenly over the year. Thus, you would have liked to show a monthly salary for April - September i.e. 6 months in your accounts to September 13?

The above being the case, can't you simply ask your accountant to 'accrue' into the accounts half of the March salary? It will then have been processed within 9 months of the year end and as such should be an allowable expense in the accounts to September 13.

From April 14 onwards make sure you get your accountant to run a monthly salary and you will avoid this 'problem' next year end.

Hope this helps.

Martin
Contratax Limited

Sensible suggestion which resolves OPs problem on face if it

[ContrataxLtd]

My company year ends at the end of Sept. From Sept 12 to Jan 13 I was between contracts and told my accountancy co I wouldn't be taking a salary or dividends.

From Jan 13 I have been in a contract. I have being paying myself a salary and dividends. Due to the reporting requirements from Vector I was advised by my accountancy co to pay a salary once a year in March / April.

My accounts from Sept 12 to Sept 13 are now being done, and my accountant tells me that I will have no salary to show for the year.

This means my corporation tax bill is massive.

Q. Should my accountants have pointed out the negatives of not taking a salary? I was unaware that by taking one annual salary I'd be left exposed.

Q. Will Hector think it odd that I am not taking a salary?

Any advice greatly received. Though please don't say "you are the director, you should have know about the salary reporting" - that is why I pay over a grand a year to an accountancy firm for!

Could you confirm my understanding here, you're basically having an annual salary processed this month (March) for the whole of the tax year instead of a monthly salary split evenly over the year. Thus, you would have liked to show a monthly salary for April - September i.e. 6 months in your accounts to September 13?

The above being the case, can't you simply ask your accountant to 'accrue' into the accounts half of the March salary? It will then have been processed within 9 months of the year end and as such should be an allowable expense in the accounts to September 13.

From April 14 onwards make sure you get your accountant to run a monthly salary and you will avoid this 'problem' next year end.

Hope this helps.

Martin
Contratax Limited

[jamesbrown]

Is that right? I thought the dates between filing and paying had to be pretty close. I agreed a date that I would pay myself on every month and the accountant did what he needed to based on my date.

No, I don't think that's right. AFAIK, the RTI submission needs to be made at the same time, or before, any payment is made, since it's a notification of payment to be made. Thus, it depends when your accountant makes the RTI submission, but I have my salary payment set up for the last day of the month, to avoid it going out before the RTI submission.

[fitzy73]

A 90 day business account? Like the Business Savings Account - Aldermore ? Does it have a decent rate?

As mentioned it might not be the wrong thing and may just be fixed next financial year. Best thing to do is to go speak to your accountant to find out what the situation is. Ask him to explain the situation clearly and see if over a two year period it works out as you expected it to.

I know people tell me it's non of our business but do you not need to re-think your warchest if you are between contracts and not be able to pay yourself. Isn't that the whole point of a war chest?

Yes, that was the account. Can't remember the rate but it was better than nowt.

I have indeed reviewed my war chest strategy since then. I've been contracting a long time but the illness (which was sudden and included surgery) made me think about access to funds.

The situation is slightly complicated by the fact that I am taking a permie role next month and therefore will probably close the company. Hence, any salary benefit over 2 years will be lost.

I'm just annoyed that the full facts of taking a salary once a year were not outlined clearly to me. Rather, I simply got an email saying "our advice is once a year" and the follow up questions I had did not include any disadvantages such as lower salary in your annual returns in year one.

If people say "you should have asked"- it is hard to ask if you dont know about something!

[TheCyclingProgrammer]

If you take an annual salary, wouldn't it still get apportioned between the different company financial years anyway?

[malvolio]

Every single client of ours pays monthly and we submit RTI monthly for them. I believe SJD had an annual option.....?

They have, but gave the option and I stuck with monthly. Only impact is having to pay myself on the same day every month which isn't exactly a hardship

[northernladuk]

I was unexpectedly out of work due to illness so, even though I had money in my company, it was locked away in a 90 day account. Therefore I could not take a salary as my business current account didn't have the funds.

I would have expected the accountant to tell me the full implications of taking a yearly salary and paying it in one lump sum.

I expect my accountant to advise me against something if they though it was not the correct thing to do.

Professionally I have clients who say they are going to do X and I would always give them the advantages and disadvantages of their course of action.

A 90 day business account? Like the Business Savings Account - Aldermore ? Does it have a decent rate?

As mentioned it might not be the wrong thing and may just be fixed next financial year. Best thing to do is to go speak to your accountant to find out what the situation is. Ask him to explain the situation clearly and see if over a two year period it works out as you expected it to.

I know people tell me it's non of our business but do you not need to re-think your warchest if you are between contracts and not be able to pay yourself. Isn't that the whole point of a war chest?

[TheFaQQer]

What happens if your accountant is swanning around on another continent playing with local wildlife when your RTI is due?

The tea boy does it.

[fitzy73]

I was unexpectedly out of work due to illness so, even though I had money in my company, it was locked away in a 90 day account. Therefore I could not take a salary as my business current account didn't have the funds.

I would have expected the accountant to tell me the full implications of taking a yearly salary and paying it in one lump sum.

I expect my accountant to advise me against something if they though it was not the correct thing to do.

Professionally I have clients who say they are going to do X and I would always give them the advantages and disadvantages of their course of action.

[northernladuk]

It's easy enough if you have the systems in place, but I can imagine lots of smaller firms have major issues in submitting RTI each month if they have to do them all manually, and they have to check each client to see when payments were actually made. If everyone paid on the same date it would be fine, but it's never that simple!

What happens if your accountant is swanning around on another continent playing with local wildlife when your RTI is due?

[Clare@InTouch]

Yeah, the letter was suggested that yearly was the default option (I think) but contact them if you wanted to stay monthly. Just sent a mail and carried on as normal. They were ok about it all.

It's easy enough if you have the systems in place, but I can imagine lots of smaller firms have major issues in submitting RTI each month if they have to do them all manually, and they have to check each client to see when payments were actually made. If everyone paid on the same date it would be fine, but it's never that simple!

[northernladuk]

InTouch are happy for monthly payments...they just file RTI at month end, but you can pay yourself at any point before that during the month if you wish. I think this is even the default position (as opposed to the 'easier' annual option being the default unless you insist otherwise).

Is that right? I thought the dates between filing and paying had to be pretty close. I agreed a date that I would pay myself on every month and the accountant did what he needed to based on my date.

[northernladuk]

Every single client of ours pays monthly and we submit RTI monthly for them. I believe SJD had an annual option.....?

Yeah, the letter was suggested that yearly was the default option (I think) but contact them if you wanted to stay monthly. Just sent a mail and carried on as normal. They were ok about it all.

[TheFaQQer]

This means my corporation tax bill is massive.

This sounds like a cashflow issue - surely next year there will be a big salary in the accounts, so the tax bill for next year will be reduced accordingly?