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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 6316
Experience:  FCCA - over 40 years experience as a qualified accountant (UK based Practitioner)
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I'm a director of a ltd company with no employees, I want to

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hi there, I'm a director of a ltd company with no employees, I want to start paying myself for the first time in the history of the company. However, I would like to be able to pay myself a lump sum without all of the hassle associated with PAYE for now if at all possible. My understanding is that I do not need to set up PAYE if there are no employees paid £118 or more? Therefor i was wanting to pay myself a lump sum of £6000 now and setup payeroll at a later date when I employ people. Am i right in thinking this is possible, and if so, what else do i need to do?
JA: Have you talked to a tax professional about this?
Customer: no not yet
JA: Anything else you want the Accountant to know before I connect you?
Customer: don't think so

Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.

Customer: replied 10 days ago.
ok thanks for that

I'm sorry, I clicked on this accidentally so i will opt out to allow another expert to answer. I don't really get involved in payrolls.

Thank you for your question.

It is your intention to keep the salary to below threshold for PAYE.

You can charge the company a salary at the rate of £118 per week and show it as other taxable income not covered on supplementary pages when you complete your tax return.

My aim is to give you a professional service. I hope this is helpful and answers your question.
Please remember to rate my service by selecting the 5 stars at the top of the screen before you leave JA today. If you need more assistance, please use the reply box below and let me know. It has been my pleasure to assist you with your question.

Customer: replied 10 days ago.
ok brilliant, so essentially i can pay myself a lump sum of £6136 and write it down in quickbooks as an expense that covers my salary from April 6th 2019 to April 5th 2020? And i'm assuming that you mean taxable expense on the end of year tax return? (as it is money going out of the company not in). Also, it seems that the company still needs to record and report the employee payment despite it being less than £118 per week, how does the company report the salary payment to HMRC? Thanks in advance, Richard

Thank you for your reply.

You need to report this salary as other taxable income when completing your tax return so that your income from all sources is disclosed.

As far as company accounts are concerned

Debit salaries

Credit Director's account/bank account

to account for salary and subsequent payment to you.

I hope this is helpful and answers your question.

Customer: replied 9 days ago.
I think I understand what you are saying, but I think that what you are proposing is the usual course of action for somebody who is not employed by the company directly and is instead self employed. However my intention is to be on payroll as an employee but not register for PAYE. Either way, if I run payroll myself, is there not anything more to it? I've been told I need to report the employees’ payments (e.g. my £6136 payment) and deductions to HMRC on or before each payday? Also, i'm unclear if i can make the entire payment in one go as technically I will be paying 34 weeks in arrears and 18 weeks in advance... is this ok with for payroll?

Thank you for your reply.

I will come back with detailed response later in the morning.

Many thanks

Customer: replied 9 days ago.
Thanks for informing me, Speak to you then. Regards

Would you like to request a phone call and I can explain everything much quicker and in full detail.. I am a qualified accountant and in practise and we can discuss all accounting issues pertaining to this subject.

Many thanks

Customer: replied 9 days ago.
Well i would, but tbh i prefer it being wrote down because it's easier for me to understand and re-read if i need to, and perhaps more importantly it's easier for me to explain fully so that you understand clearly as i think that maybe you originally mis-understood my situation and it would only be worse on the phone. So for the sake of clarity, it's easier by text. Sorry for the inconvenience!

Thank you for your patience.

In responses to points raised by you -

If someone is self employed they would invoice the company for services rendered and their charges would be classified as professional or consultancy charges.

You need to register the company (employer) for PAYE scheme if you have employees earning more than £118pw. You would be given a PAYE Reference number and Accounts Office Reference number to quote when dealing with any returns pertaining to employment. As it is your intention to keep the salary below the level to operate PAYE scheme you won’t be reporting monthly payments on RTI (real time information).

I would advise you to accrue the weekly wage in your accounts every month whether you pay yourself in the month or not. It is important to recognise the expense and it becomes a creditor until such time as it is paid.

You need to register the employer for PAYE scheme in the long run.

I hope this is helpful and answers your question..

Hi there

Just checking to see if you need more clarification/information or have I answered your question.

Many thanks

Customer: replied 9 days ago.
Hi it's starting to make more sense to me know thanks. So it seems that I do not need to report HMRC on a real time basis, but still need to record everything as usual. So does my company not need to report to HMRC about it on any level other than the usual end of year tax return declaring I paid out for salary? And as for the employee, (myself in this case) i do not need to do anything or notify HMRC as the company is already taking care of all the paperwork?
Customer: replied 9 days ago.
Also based on what you are saying about the importance of recognizing the expense and becoming a creditor until such time it is paid, does that also mean that i can't just pay myself in advance for the rest of the tax year like i wanted to? Thanks in advance, Rich

Thank you for your reply.

To summarise

The company would report your salary as director's salary when filing Company tax return at the end of accounting period (CT600 return)

You would report this salary within your main tax return as you would not have received a P60 (P60 issued to employees at the end of each tax year when operating a payroll under PAYE)

As far as paying yourself in advance for the rest of the year, the payment in advance would be charged to director's account in Balance sheet and accounting entries done each month to transfer a sum to director's salary expense heading in p&l account.

I hope this is helpful and answers your question.

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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 6316
Experience: FCCA - over 40 years experience as a qualified accountant (UK based Practitioner)
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