Advice if Possible - Pleeeeeassse

vickidm Registered Posts: 12 Regular contributor ⭐ ? ⭐
Hi All - 1st post and I am after advice - theres a surpise!

However I wonder if anyone could give me some advice please. I have a client who became a LTD co at the start of Dec. Unfortunately they did not really understand much to do with the accounts side, and initially they were billing the business - e.g. both Directors were giving an invoice to the business for the works completed - and paying themselves that amount. They were advised that this was not the best thing to do. So they then registered for PAYE at start of May, and have now filed P35 - back dated to start of Dec, and said that all monies drawn were salaries and have paid the back dated Tax owed on this - and have also told me they know they will have to pay a late filing penalty. The total they have drawn from the business is low at a total of £3030 from Dec to March They have now called me in to assist. This is all OK, - however they have filed P35 for exact amount they have drawn - eg they have drawn £1000 - on P11's they have put gross of £1000, not NET... so theoretically they have still under paid on their tax - as anything they have paid themselves should of been NET...does that make sense?. Bearing in mind they have just filed everything (at start of week), and only engaged me today - any ideas on what would be the best way to resolve this? Or what extra advice I could offer them - its not a great deal outstanding extra approx £200. They have no accounts filed yet - and want me to set up systems for them dating back to 1st Dec... so I do have the opp now to make changes here - but obvisously not to what they have already filed.

Going forward I have suggested £500 per month salary, and additional monies paid as Dividends... but still need to try and sort what has gone before in best way possible..

Any suggestions at all greatfully received.


  • reader
    reader MAAT, AAT Licensed Accountant Posts: 1,037
    vickidm wrote: »
    both Directors were giving an invoice to the business for the works completed - and paying themselves that amount.

    Personally, I would DR Directors' current accounts and CR Bank when they paid themselves.

    At the year end this will probably result in overdrawn Directors' current accounts which I would eliminate by raising a final dividend, i.e. DR Final Dividends and CR Directors' current accounts.

    I think the £500/month salary is a good idea however I would probably increase this to £623/month, i.e. DR Directors' renumeration £7,476 and CR Director's loan account £7,476 per director.

    As long as the directors' loan accounts aren't overdrawn by more than £5,000 during the year HMRC may turn a blind eye to the way these two inexperienced owner-managers have initially extracted money from the company.
  • ademoore
    ademoore Registered Posts: 146 ? ? ?
    Could you consider re-filing the P35 with the correct figures, and then a covering letter explaining the situation?
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