Director's Remuneration - Options

7chb

Hi
I set-up a Ltd company.  In the early stages, I registered for PAYE and set myself up as an employee however I didn't start paying myself a salary until towards the end of the 19/20 tax year.  Part of this was because I continued to be an 'employee' on the payroll for the firm I previously worked for, doing ad-hoc work on a zero-hours contract basis.

However I was busier than anticipated with my new venture and so the pay I received from my old firm, as well as the pay from my company, did not meet my Personal Allowance.  All other 'pay' I had paid myself through the company was classed as withdrawals from the Directors Loan Account balance which had been accumulated on setting the company up.

I am now in the process of completing both my YE accounts for the company, as well as my self-assessment for 19/20 YE.  In order to a) reduce my corporation tax liability and b) to utilise all of my personal allowance for the 19/20 YE I am looking at paying myself an additional salary prior to 05/04/20.  From my understanding, if I was to amend an already submitted FPS submission, including additional pay to myself in March 20, am I right in saying I will be at risk of a penalty of late submission for the 'correct' FPS for that period given it was 10 months ago?  If so, could I in theory get away with classing myself as a consultant, invoicing my company for this work with an invoice dated March 20, and then including this as separate self-employed income on my self-assessment return? Or is there another option which will satisfy both my company and my personal tax situation?

Thank you

unholyangel

In order to a) reduce my corporation tax liability and b) to utilise all of my personal allowance for the 19/20 YE I am looking at paying myself an additional salary prior to 05/04/20. 

Do you have a time machine? Because that's what you'd need to make that change. If you only paid yourself (for example) 5k under paye, you cannot now say you paid yourself 8k in that year. Because you didn't. 

Dazed_and_C0nfused

am I right in saying I will be at risk of a penalty of late submission for the 'correct' FPS for that period given it was 10 months ago?  

I think you would have bigger issues to worry about with HMRC than a late submission penalty.

Beenie

but if you were an employee and/or a director, you are not self-employed. You're an employee subject to PAYE. 

7chb

Beenie said:

but if you were an employee and/or a director, you are not self-employed. You're an employee subject to PAYE. 

But what if the consultancy work was for something unrelated to normal trade of the business, as a Director would I be expected to be an employee covering all areas (such as accountancy/IT services) or could it be argued that these are outside the normal duties?  

7chb

Dazed_and_C0nfused said:

am I right in saying I will be at risk of a penalty of late submission for the 'correct' FPS for that period given it was 10 months ago?  

I think you would have bigger issues to worry about with HMRC than a late submission penalty.

HMRC seem to have publications on a EYU (Earlier Year Update) submission which appears to be for this reason though?

unholyangel

7chb said:

Dazed_and_C0nfused said:

am I right in saying I will be at risk of a penalty of late submission for the 'correct' FPS for that period given it was 10 months ago?  

I think you would have bigger issues to worry about with HMRC than a late submission penalty.

HMRC seem to have publications on a EYU (Earlier Year Update) submission which appears to be for this reason though?

EYU is to correct a mistake - where the information you originally submitted was not what actually happened. 

It can't be used to amend the correct information to fraudulent information. 

7chb

unholyangel said:

7chb said:

Dazed_and_C0nfused said:

am I right in saying I will be at risk of a penalty of late submission for the 'correct' FPS for that period given it was 10 months ago?  

I think you would have bigger issues to worry about with HMRC than a late submission penalty.

HMRC seem to have publications on a EYU (Earlier Year Update) submission which appears to be for this reason though?

EYU is to correct a mistake - where the information you originally submitted was not what actually happened. 

It can't be used to amend the correct information to fraudulent information. 

Ok thank you for clarifying, I hadn't come across it before and so thought it may be a possible option.

Presuming there are no other options, I'm guessing the best bet is to take the hit on the Corporation Tax for that period and to instead include dividends from my post tax profit on my self assessment to cover my remaining personal allowance?

[Deleted User]

7chb said:

unholyangel said:

7chb said:

Dazed_and_C0nfused said:

am I right in saying I will be at risk of a penalty of late submission for the 'correct' FPS for that period given it was 10 months ago?  

I think you would have bigger issues to worry about with HMRC than a late submission penalty.

HMRC seem to have publications on a EYU (Earlier Year Update) submission which appears to be for this reason though?

EYU is to correct a mistake - where the information you originally submitted was not what actually happened. 

It can't be used to amend the correct information to fraudulent information. 

Ok thank you for clarifying, I hadn't come across it before and so thought it may be a possible option.

Presuming there are no other options, I'm guessing the best bet is to take the hit on the Corporation Tax for that period and to instead include dividends from my post tax profit on my self assessment to cover my remaining personal allowance?

For 2020/21 - fine! For 2019/20 - not possible! When is the dividend date?

Jeremy535897

Dazed_and_C0nfused said:

am I right in saying I will be at risk of a penalty of late submission for the 'correct' FPS for that period given it was 10 months ago?  

I think you would have bigger issues to worry about with HMRC than a late submission penalty.

I well recall a client's experience of doing this sort of thing in the mid eighties (taking a corporation tax deduction for accrued remuneration but not actually paying PAYE on it until it was drawn from the loan account). Inland Revenue Enquiry Branch (as it was then) were involved (my firm was approached in a panic by the taxpayer to sort it out, as he had very realistic visions of going to jail). Most people never to get to meet the Inland Revenue heavy mob. It is not an experience to be recommended.

7chb

Jeremy535897 said:

Dazed_and_C0nfused said:

am I right in saying I will be at risk of a penalty of late submission for the 'correct' FPS for that period given it was 10 months ago?  

I think you would have bigger issues to worry about with HMRC than a late submission penalty.

I well recall a client's experience of doing this sort of thing in the mid eighties (taking a corporation tax deduction for accrued remuneration but not actually paying PAYE on it until it was drawn from the loan account). Inland Revenue Enquiry Branch (as it was then) were involved (my firm was approached in a panic by the taxpayer to sort it out, as he had very realistic visions of going to jail). Most people never to get to meet the Inland Revenue heavy mob. It is not an experience to be recommended.

Thank you, that's why I thought I would ask on here rather than doing something which would have been deemed as risky/fraudulent! I was hoping there may have been a genuine work-around for the issue but I'd rather learn a lesson and pay tax due than take that risk.