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SMP/EoY accounts query

SussexAccountancySussexAccountancy Settling In NicelyRegistered Posts: 28
Hi

I have a very small limited company client (she should be a sole trader, which we are trying to get her back to) and am currently doing her year end. Pretty straightforward, except she was paid SMP last year, and as she is a such a small company, it was paid into the bank, rather than reducing her PAYE liability, as it normally would. She recieved her SMP payments in April, July and November 12, which came to a total of just over £5000. Meanwhile she has taken a regular monthly wage out of the bank which totals for the year just under £6000

Could someone just confirm how these two elements are dealt with in the EOY accounts - I am not responsible for her payroll, as we stopped these payments for the new financial year- I just need to confirm how to deal with in the accounts, to get CT correct and also make sure everything balances (and anything else? All her yr end payroll has been completed) I am thinking I offset the SMP rebate paid into the bank against the wages paid out of the bank, so that only the difference is classed as chargeable expenses, and the accounts balance?

But am I missing anything else? Or wrong altogether?


Thanks very much for your help!

SA

Comments

  • Rozzi RainbowRozzi Rainbow Trusted Regular Registered Posts: 465
    Is your client the only employee of the Company? The figure for salary in the EoY accounts, needs to be what has gone through the payroll for that period, less any SMP reclaimed from HMRC. When you say she received her SMP payments totalling £5,000 do you mean the company received them from HMRC or she received them from the company? If she only received £6,000 in total from the company (which includes her SMP) then the £5,000 reclaimed in SMP will reduce this and £1,000 will be shown in the accounts.
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    Check the time periods tie up too.

    SMP refunds are usually paid in a lump sum and may overlap the financial year. You will want to defer that income if any relates to SMP paid out in the next financial year.

    Also exclude small employer relief from the net off.
  • SussexAccountancySussexAccountancy Settling In Nicely Registered Posts: 28
    Is your client the only employee of the Company? The figure for salary in the EoY accounts, needs to be what has gone through the payroll for that period, less any SMP reclaimed from HMRC. When you say she received her SMP payments totalling £5,000 do you mean the company received them from HMRC or she received them from the company? If she only received £6,000 in total from the company (which includes her SMP) then the £5,000 reclaimed in SMP will reduce this and £1,000 will be shown in the accounts.

    Thanks for your replies - very useful. Yes, she is the only employee, (a Director) she recieved a sum total of £5022.91 into the bank from her payroll agents, and she took 12 monthly wages into her own account at £480.30 - a total of £5763.60. (as per bank statement). I've realised I also have her P11/60 for the year, which shows SMP M1-8 at a total of £4144.23, which is fine, and her earnings at £5564 (column 1a - M9) and £1924 (column 1b M8-9) = £7488. No Tax. No NI. Apologies for specifics, but I hope it all makes sense. I offset wages against SMP to expenses, but does it also suggest she has not taken enough money out of the company for wages this year? It seems an odd way to process wages? Should I go back to her previous accountant and clarify? Thanks Jo
  • Rozzi RainbowRozzi Rainbow Trusted Regular Registered Posts: 465
    When is the Company's year end? If it is 31st March, you should be able to get the wages figure to reconcile to the P60, if not it probably won't match exactly due to changes in salaries etc.

    Looking at the figures you have quoted from her P60, it looks like her payroll agents have given her a salary of £7,488 to avoid tax and NI, of which £4,144.23 is SMP. Therefore the salary paid by her Company is the difference - £3,343.77, and this would show as the expense in the accounts. Yes, it looks as though the Company hasn't paid "enough" wages, but that is true because HMRC have paid the SMP element, and the Company has only paid the difference. Imagine a bigger employer with a few employees - one of whom goes on maternity leave. The employer will reclaim her SMP from HMRC, so in the employer's accounts it will look as though he has paid less wages (or the wages might be the same amount if they have hired another employee to cover the maternity leave).

    I'm not really sure where your first figures come into things - the £5,022.91 and the £5,763.60. Was the £5,022.91 the total SMP reclaimed from HMRC? In which case, as Dean pointed out above, some appears to relate to the next tax year, if only £4,144.23 was declared on her P60. The remaining £878.68 would be deferred income. Was the £5,763.60 the amount your client actually paid herself from the Company? In which case as £7,488 has been declared as salary, the remaining £1,724.40 is still owed to her, and would go on the director's loan. Of course, if the Company's year end is anything other than 31st March, these figures I've just worked out won't tie up at all, but if you can figure out how much the SMP was per month, and which months it applies to, you should be able to work out the year end figures using the same procedure.
  • Rozzi RainbowRozzi Rainbow Trusted Regular Registered Posts: 465
    Was the £5,022.91 the total SMP reclaimed from HMRC? In which case, as Dean pointed out above, some appears to relate to the next tax year, if only £4,144.23 was declared on her P60. The remaining £878.68 would be deferred income.

    Just reading through Dean's reply again, I think I've answered my own question here - was any of the £878.68 extra the small employer relief? In which case I would assume you show it as sundry income received, as there would be no Employer's NI to net it off against.
  • SussexAccountancySussexAccountancy Settling In Nicely Registered Posts: 28
    Just reading through Dean's reply again, I think I've answered my own question here - was any of the £878.68 extra the small employer relief? In which case I would assume you show it as sundry income received, as there would be no Employer's NI to net it off against.

    I think I have it sorted as follows, but as ever it brings up a couple of other questions. I have looked at the previous year to compare and this is how it stands: (Yr end 31.03.13)

    monies out as per the business bank (monthly standing order) 12 x £480.30 = £5763.60 - same as 2011/12 as per previous yrs nominal wages breakdown from previous accountant.

    2011/12 P60 - £7071.96 in this employment, including an SMP payment of £732.38

    2012/13 P60 - £7488 in this employment including an SMP payment of £4144.23

    SMP recieved in business bank for 2012/13 - 5022.91 which is 103% of total SMP payments. One question - there seems to be no accrued income for 2011/12 SMP payment of £732.38 so where would I put that income (plus 2012/13 "income") into a set of limited accounts for 2012/13 (I am used to these payments offsetting a larger liability of PAYE and therefore being "invisible"!)

    2nd question - The Director's P60 has stated that she has earnt £7488 upto 05/04/13 but she has clearly taken £480.30 by monthly standing order over the year - which ties in with the accounts for the previous year. She has very few other transactions going through the bank.

    My question is that she still appears to have a discrepancy in the wages she has taken and what her P60 is stating at a value of £1724.40 (P60 @ £7488 less £480.30 x 12) Unless I am missing something?

    Any input would be greatly appreciated, or is this something to clarify with the previous accountant?

    Thankyou very much for all help already recieved!


    Jo
  • groundygroundy Trusted Regular Registered Posts: 495
    If she has been herself less than has been declared on the P60, then the difference is a credit to the directors loan as this money is due to her.
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