Deferred costs / PAYE & NIC's

CaroCreweCaroCrewe New MemberRegistered Posts: 7
Hi

If we wish to get costs into a Limited Company to reduce profit (less Corp. Tax therefore due) can we arrange to increase Directors pay, and settle the net due to their loan accounts in the Balance sheet in the interim, thereby deferring PAYE/NIC liability, until we can actually pay them via the Bank (cashflow restrictions) & also settle the PAYE/NIC's due?

This is not an area I'm up on legislatively, so any assistance with relevant cases / documentation to enable me to gen up on this area will be gratefully received, or alternatively another suggestion that will decrease profit & defer cash flow outwards.

Thank you in advance.

Caroline

Comments

  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    You can do that but presumably the resulting PAYE bill is going to outweigh the corp tax that you will save?
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,069
    presumably the resulting PAYE bill is going to outweigh the corp tax that you will save?
    Exactly what I was thinking.

    Edit: Oh, and I don't see it would defer the PAYE/NI liability, once it's credited to the DLA it's 'paid' and thus tax and NI are due to HMRC by the due date. AFAIK you can't accrue for a salary and then not declare it on the payroll/ P35. Also, salaries are only an allowable deduction against CT if they are actually paid within 9(?) months of the year end, I believe.
  • CaroCreweCaroCrewe New Member Registered Posts: 7
    Thank you for the 2 replies. The forums are a really useful way of "having someone to speak to" when you predominantly work on your own.

    I agree with you Dean over the PAYE/NIC outweighing the corp tax-it is more of a cashflow position stopping us right now from just paying it out cash wise.
    I understand that we can accrue the bonuses (or extra salary increase) and as long as associated accrued PAYE/NIC's are paid within 9 months of year end (thanks Monsoon), then this will assist with recovery of cash position during these months, and also be allowable against CT.

    Thanks again both

    Caroline
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,069
    CaroCrewe wrote: »
    I understand that we can accrue the bonuses (or extra salary increase) and as long as associated accrued PAYE/NIC's are paid within 9 months of year end (thanks Monsoon),

    I am a little hazy on this point in terms of timscale, but the PAYE/NI definitely need to be paid on time and declared on P35 - it's the salaries themselves that need to be paid to the employees/directors within x months of the year end - apologies if that wasn't clear.

    Surely the PAYE/NI bill being far higher than the CT bill will need paying sooner than the CT which puts you in a worse cashflow situation?
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