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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4973
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Hi there. I am really struggling to fill in my tax return

Resolved Question:

Hi there. I am really struggling to fill in my tax return & it is now overdue. I cannot afford to hire an accountant this time round. I was declared bankrupt on 30th September 2013. It is SO complicated... I will list the items below!
From April 13 - May 13 I was a sole trader. So that is easy, I can find those income figures.
HOWEVER, from May 13 the business became a Ltd Co & I was the director. Earnings became mixed at this point. The sole trader bank account was kept live, as there were a lot of outstanding client invoices which needed to be paid into THAT account. Any invoices paid into that account, that I had earned from - I was paid. So again, I can list these amounts as they were earned (but not paid) whilst I was still a sole trader.
Any new jobs that were invoiced through the Limited Company account - funds were drawn over as "Directors Drawings" (I was not on PAYE). Does that make sense?
All my bank accounts were with Natwest, so they were all closed when I went bankrupt. The Ltd company was taken over by a new director in Sept 2014 & he opened new bank accounts. I have earned no money through the company since my bankruptcy.
My confusion is WHAT to out on the HMRC forms? I have done some further research & it says that as a director I should have either been on PAYE, or the money is classed as "director loan". If it was a director loan & I went bankrupt - then I am unable to pay it back to the company. Yet I still received it. So should it be classed as earnings & declared?
I am so, so confused! Please help! Thanks x
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

Any sums you took out of the company would fall into one of these categories
- salary under PAYE
- dividends out of taxed profits
- repayment of initial sums you would have invested/loaned to the company to fund the company working capital etc.

If the company made a profit from those sales then you could take profit after tax as dividends and declare this amount withdrawn as dividends on your tax return. Please note you only report actual amounts withdrawn from the company in the tax year ended 5 Apr 2014.

If you did not operate PAYE in the company, then you could consider showing this amount as fee received as a one off within the main part of the tax return under other taxable income not covered by supplementary pages.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

So to clarify, The OUTGOING costs I list are anything relating to the Sole Trader Business until it ceased.

The income is any profit made as a sole trader PLUS one other figure which shows "Other Income" - and this is the amount drawn from the Ltd Company.

I actually don't have to pay this tax anyway, as it falls under the

bankruptcy. But I do obviously have to submit the amounts.

Also - what happens with regard to the money drawn out from the Ltd Company before I resigned & it was taken over. I can't pay that back, so how does that work with regards ***** ***** tax return. Thank you

Expert:  taxadvisor.uk replied 2 years ago.
Heather, thank you for your reply.

You are correct in regard to outgoing costs.
Your income in the tax year is profit from sole trader plus other income from sole trader business banked into company bank account.

Monies drawn out from the LTD company before you resigned - you can show as either
- taxable fees paid to you not under PAYE or
- dividends paid to you out of company profits

both are reported within the main tax return.

I hope this is helpful.
Customer: replied 2 years ago.

I'm so sorry - I'm still not clear.

"Your income in the tax year is profit from sole trader plus other income from sole trader business banked into company bank account"

Just to clarify, the INCOME I received was:

Sole trader profit banked in personal account

Ltd Company drawings banked in personal account

Nothing was banked into company bank account.

Expert:  taxadvisor.uk replied 2 years ago.
Heather, thank you for clarification.

Sole trader profit to be shown as self employment income and

Monies drawn out from the LTD company before you resigned is not part of income as sole trader. You can show it as either
- taxable fees paid to you not under PAYE or
- dividends paid to you out of company profits

I hope this is helpful.
Customer: replied 2 years ago.

Monies drawn out from the LTD company before you resigned is not part of income as sole trader. You can show it as either
- taxable fees paid to you not under PAYE or
- dividends paid to you out of company profits

So - to be clear. Is there a box on my form which allows for taxable fees paid not under PAYE? Or do I just list as "Other Income"


Thank you! Sorry to keep coming back - but I'm still not 100% clear where to log the amounts xx

Expert:  taxadvisor.uk replied 2 years ago.

Heather, thank you for your reply.

It is to be reported under "Other UK income not included on supplementary pages" as other taxable income.

I hope this is helpful.

I should make you aware if you are now sending a paper tax return, you will be charged a £100 penalty as late filing penalty. You should instead file you tax return online.

I hope this is helpful

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