Reply to: What Happens When The Money Runs Out.....

[tim123]

That's mostly right yes. I was under the impression that it was possible to defer some of the payment to a later date, just so long as you are completely up front with HMRC.

It's theoretically possible, but they don't like doing it.

Their attitude is, if you want to use us as a bank you should go and borrow the money from a bank.

tim

[Grinder]

Well, there is of course the go back in time feature called search, type in "directors loan" and you will be presented with this, has all the info you need.

http://forums.contractoruk.com/accou...directors+loan

It wasn't my question - I'm just sticking my 2p into the debate. When it boils down to it, "Directors Loan" is not the right way forward here.

[Gonzo]

That's mostly right yes. I was under the impression that it was possible to defer some of the payment to a later date, just so long as you are completely up front with HMRC.

There was something about that reported here:

http://news.bbc.co.uk/1/hi/business/...0.stm#Taxation

I haven't looked into the details though and don't know whether it would help anyone in our type of circumstances.

[Lewis]

I really wish I was here before

Well, there is of course the go back in time feature called search, type in "directors loan" and you will be presented with this, has all the info you need.

http://forums.contractoruk.com/accou...directors+loan

[wurzel]

I think what the OP meant was

He has no work but let's say .... 20k in his biz account.
He has a 20k corporation tax bill due in October 2009
Can he spend the 20k to keep the company open but if he gets no more work at all and all the tax is spent, can he then say to the tax man in October 2009, sorry, spent it and the tax man will say, that's OK, no problem, pay me later.

That's mostly right yes. I was under the impression that it was possible to defer some of the payment to a later date, just so long as you are completely up front with HMRC.

[Grinder]

You can take out a director's loan up of to £5K with no issues as long as you pay back before year end. No BIK to pay on loans <£5K. Discussed (with links to rules) on this forum before.

I really wish I was here before

[Jubber]

I think what the OP meant was

He has no work but let's say .... 20k in his biz account.
He has a 20k corporation tax bill due in October 2009
Can he spend the 20k to keep the company open but if he gets no more work at all and all the tax is spent, can he then say to the tax man in October 2009, sorry, spent it and the tax man will say, that's OK, no problem, pay me later.

[pmeswani]

I am pretty sure you cannot owe your company money as a director's loan, as you will owe personal tax on the notional interest saving as a benefit in kind.

The salary from your company will continue to be a deductible expense for the company, thus reducing the eventual tax burden. On this basis, you should be able to calculate what dividends you can draw until the company year-end.

If you take a loan out with a bank, you owe the bank money. If you take a loan out against your company, you owe the company money. If you take the loan out of what is set aside as Corp Tax... you will need to put the money back before the Tax Man takes the Corp Tax from your company. I shouldn't need to spell that bit out....surely.

You may be obliged to give your company interest on the loan you have taken out from the company, but without doing some searching on this site and asking my Accountant, I am unsure if that is totally correct.

[Turion]

In this economess we're in you may need to think outside of the IT box if you need money. KFC are creating 7000 new jobs so there's opportunities out there in the non IT world.

[Lewis]

I am pretty sure you cannot owe your company money as a director's loan, as you will owe personal tax on the notional interest saving as a benefit in kind.

The salary from your company will continue to be a deductible expense for the company, thus reducing the eventual tax burden. On this basis, you should be able to calculate what dividends you can draw until the company year-end.

You can take out a director's loan up of to £5K with no issues as long as you pay back before year end. No BIK to pay on loans <£5K. Discussed (with links to rules) on this forum before.

[Grinder]

I'm in a similar position right now. My Accountant suggested not to take any more divi's out. However, if worse scenario is envisioned.... take out a director's loan and make sure you pay it back before you are requred to pay the bill. At the end of the day, you have to make the decision on whether you can pay it back in time for the tax man to pick it up.

I am pretty sure you cannot owe your company money as a director's loan, as you will owe personal tax on the notional interest saving as a benefit in kind.

The salary from your company will continue to be a deductible expense for the company, thus reducing the eventual tax burden. On this basis, you should be able to calculate what dividends you can draw until the company year-end.

[tim123]

Pay the tax now. Or get a CTD(see bn66 thread) : HMRC pay you interest on tax paid early!

At the new, fantastic, rate of 0%.

tim

[BrilloPad]

Pay the tax now. Or get a CTD(see bn66 thread) : HMRC pay you interest on tax paid early!

[TCL]

I do plan to, given that the useless **** takes a week to reply to an email, I thought I'd test the water here first.

Do we have the same accountant?

[pmeswani]

.......and you have to dip into the money you have set aside for your tax bill?

I may be in this situation in a couple of months time. Cutting to the chase, do HMRC let you defer payment to a later date without incurring interest and penalties?

I'm in a similar position right now. My Accountant suggested not to take any more divi's out. However, if worse scenario is envisioned.... take out a director's loan and make sure you pay it back before you are requred to pay the bill. At the end of the day, you have to make the decision on whether you can pay it back in time for the tax man to pick it up.