Limited company owner but not director

sylviad_2

Not sure if right place to ask for advice for my problem. I am an IT contractor. My previous contract was through an umbrella company. My current contract is through my own company. Well, this is where is getting complicated. I intended to set up my own company but my husband had a dormant company (he is employed with another company) he didn’t want to close and was still paying an accountant to file for so we asked them which option would be best. Set up my own or use my husband’s? They said best to use my husband’s and with him still director and me 100% shareholder and employee. They have full control of the hmrc tax accounts and companies house accounts but I have my personal account with hmrc and noticed that the company is missing from my employment history. I am getting invoices and being paid from my contract work. I read online that a company should register their employees before first payment. I started work 3 month ago and taken money from the business account. As owner of the company, can I also be the sole profit maker without being an employee? Why would the accountant set up employer payee if didn’t add my name as employee. Is this not illegal? I don’t understand what the accountants are doing and they brush me off every time I ask. They say all is taken care of. I am concerned that something is not right. Any advice would be greatly appreciated.

gm0

My current contract is through my own company. Well, this is where is getting complicated. I intended to set up my own company but my husband had a dormant company (he is employed with another company) he didn’t want to close and was still paying an accountant to file for so we asked them which option would be best. Set up my own or use my husband’s? They said best to use my husband’s and with him still director and me 100% shareholder and employee.

This doesn't seem wrong.  Two companies is basically double the cost of one.  If you are now on CH on the CSH01 filed confirmation statement as the 100% owner (i.e. receive all dividends) then nothing seems very amiss).  The only oddity is not making you a director.  Leaving him on - if an option for the future.   The overhead of one vs 2 directors is minimal.


They have full control of the hmrc tax accounts and companies house accounts

Normal

but I have my personal account with hmrc and noticed that the company is missing from my employment history. I am getting invoices and being paid from my contract work. I read online that a company should register their employees before first payment.

There may be a missing filing. Cannot say.  For making tax digital - setting you up to do payments correctly is indeed upfront.  It depends somewhat - on how you are paid.  How the contract out.  And the contract with you - employee, director, self-employed sub-contractor working on personal account - is being approached.


I started work 3 month ago and taken money from the business account. As owner of the company, can I also be the sole profit maker without being an employee?

You can be a director of a Ltd.  And it be active.  And not run payroll.  And not have a pension scheme. Filing the exemption for the tiny PSC based on one of the exemptions.  So this depends on how you are being paid.  And the written (and tax effective) contract between you and the ltd. And the ltd and the client

You really should be (one or more of)

Paid as employee (PAYE) to some level - per NI stamp etc.  Outsourced payroll Payslips. From the Ltd to you.
Or paid dividends as 100% owner (subject to dividend tax)
Repaid legitimate expenses as incurred per policies (and tax rules incurred on behalf of the company)

Any other extraction from business account is shall we say - difficult.  We get into the subject of director loans and such like.

It is possible (perhaps) to sub-contract you as a self-employed individual. Non-director. Who owns the company. And make a "business payment" to this self-employed individual.  Which is then self-employment income on your SA return. 

Personally I would regard that in the context you describe as a wideboy approach. Though this is from an instinctive habit of widely swerving the edge of rules and wanting to (and having) avoided tax audit for 15 years.

How you are currently paid may help you understand what they are doing and why it is.  And in turn whether it is (fully) legitimate. 

Market practices and level of documentation kept to justify them against an HMRC tax audit - is variable out there.

If you are not a payroll employee and paid PAYE.  Then the LTD won't show up as paying NI on you - because it likely hasn't registered you to run payroll (on whatever mix of pay and dividends) and isn't.  Problem there is likely to be a missing NI stamp contribution year. (Or certainly was. I am a bit out of date on that). 

DullGreyGuy

sylviad_2 said:

Not sure if right place to ask for advice for my problem. I am an IT contractor. My previous contract was through an umbrella company. My current contract is through my own company. Well, this is where is getting complicated. I intended to set up my own company but my husband had a dormant company (he is employed with another company) he didn’t want to close and was still paying an accountant to file for so we asked them which option would be best. Set up my own or use my husband’s? They said best to use my husband’s and with him still director and me 100% shareholder and employee. They have full control of the hmrc tax accounts and companies house accounts but I have my personal account with hmrc and noticed that the company is missing from my employment history. I am getting invoices and being paid from my contract work. I read online that a company should register their employees before first payment. I started work 3 month ago and taken money from the business account. As owner of the company, can I also be the sole profit maker without being an employee? Why would the accountant set up employer payee if didn’t add my name as employee. Is this not illegal? I don’t understand what the accountants are doing and they brush me off every time I ask. They say all is taken care of. I am concerned that something is not right. Any advice would be greatly appreciated.

Does the company have a pension scheme setup? If they have employees they legally must have one on offer and auto-enrol you to it even if you intend to opt out after. 

Have you checked what instructions you've actually given them? The fees for doing accounts and filings for a dormant company will be very different to the fees for doing accounts, PAYE, VAT etc for a trading company. Have you actually agreed that they should be providing the higher services?

What money have you taken out from the company? Salary? Dividends? Directors loan?

What's your husband's situation at the moment? Were you always the sole shareholder or were shares assigned to you?

May be time to consider switching accountants if you aren't happy with their services. They do vary with how conforming to rules and proactive they are exactly, its good to find one thats on the same level as you are.

sylviad_2

I’ll try to answer the questions. First, it was my husband’s ltd so he was 100% shareholder and director. The ltd was dormant for 2 years and I had nothing to do with it. He was employed by another company all along and still is. 

I got a contract job outside IR35 where I was asked to provide the details of my ltd. This is when we asked the accountants and paid them a lot of money to make the ltd active and add me as 100% shareholder. It was their advice to do it like this. I have no clue how these things work and the online information is not very useful to someone new to this. Hence relying completely on the accountants. It is a firm with many employees, just to explain why plural. Of course their fees have changed and yes, payroll is one service on the list I am paying for. 

My husband had a business account linked to the ltd that was empty and he just topped up occasionally for the bank fees. He added me as a signatory with my own access now and got a business bank card. I am paid by transfer into that account and receive invoices (I am paid a daily rate and vat is included). I was told by the accountants to take £1000 each month from the account as salary. So I’m supposed to be an employee. I told them that that’s not enough for my expenses and they said it is because of lower taxes and I can take the rest of the money as dividends. How is that different in practice, I have no idea since I do one transfer to my personal account. And I wasn’t told about anything else. I thought that the accountants were doing the payroll including pension scheme, NI, my student loan. But nothing shows on my personal tax account. I was asking for advice hoping that there is an explanation. Once when I asked they said it shows different on the online account because they are using a software to submit online. 

Marcon

sylviad_2 said:

Not sure if right place to ask for advice for my problem. I am an IT contractor. My previous contract was through an umbrella company. My current contract is through my own company. Well, this is where is getting complicated. I intended to set up my own company but my husband had a dormant company (he is employed with another company) he didn’t want to close and was still paying an accountant to file for so we asked them which option would be best. Set up my own or use my husband’s? 

This is nonsense. A dormant company has the same accounts year on year, with just the dates changing. Filing online is easy to do - and your husband only needs to file his dormant company accounts (no charge) and an annual confirmation statement (£13). Absolutely no need for an accountant if the company is truly dormant, but unfortunately I don't think it is, given it has a fee-bearing bank account.

sylviad_2 said:

his is when we asked the accountants and paid them a lot of money to make the ltd active and add me as 100% shareholder. It was their advice to do it like this. I have no clue how these things work and the online information is not very useful to someone new to this. they said it shows different on the online account because they are using a software to submit online. 

There's no cost associated with making a dormant company active. Once it does anything to 'cause an entry to be made in its books of account' (eg starts trading - or pays bank fees on a bank account - see below), it loses its dormant status automatically. Adding you as a 100% shareholder - or more accurately replacing your husband as the previous 100% shareholder, presumably(?) by a simple transfer of shares - should take no more than 10 minutes, including filing online, so why you had to pay them a lot of money to do something so basic is beyond me.

Why not set up your own company. It's extremely quick and easy to do online, using model articles from Companies House as the basis.

sylviad_2 said:

My husband had a business account linked to the ltd that was empty and he just topped up occasionally for the bank fees. He added me as a signatory with my own access now and got a business bank card. I am paid by transfer into that account and receive invoices (I am paid a daily rate and vat is included). I was told by the accountants to take £1000 each month from the account as salary. So I’m supposed to be an employee. I told them that that’s not enough for my expenses and they said it is because of lower taxes and I can take the rest of the money as dividends. How is that different in practice, I have no idea since I do one transfer to my personal account. And I wasn’t told about anything else. I thought that the accountants were doing the payroll including pension scheme, NI, my student loan. But nothing shows on my personal tax account. I was asking for advice hoping that there is an explanation. Once when I asked they said it shows different on the online account because they are using a software to submit online. 

Why would a dormant company have a bank account at all if it's incurring fees? Paying those fees would in itself be enough to forfeit the company's dormant status, because they are transactions which would be entered in the company's books of account - so you shouldn't be filing dormant company accounts for such a company.

Is this (now non-dormant) company registered for PAYE? If not, what's happening is quite simply unlawful.

Rather than being fobbed off by accountants who sound less than ideal, run the payroll yourself using HMRC's free to download, free to use software designed specifically for small companies with 9 or fewer employees:

https://www.gov.uk/basic-paye-tools


Be in no doubt that if you let things continue, sooner or later there is going to be a very uncomfortable reckoning with HMRC. You and your husband need to get a grip on the situation - and changing to a decent, helpful accountant might be a good first step, based on your comments above. The current ones are running expensive rings round you, from what you say.

Marcon

sylviad_2 said:

As owner of the company, can I also be the sole profit maker without being an employee? Why would the accountant set up employer payee if didn’t add my name as employee. Is this not illegal? I don’t understand what the accountants are doing and they brush me off every time I ask. They say all is taken care of. I am concerned that something is not right. Any advice would be greatly appreciated.

Yes, you can be the sole fee earner, but you can't draw a salary if you aren't an employee, and you can't charge the company a director's fee if you aren't a director. Normally the only way you can lawfully access funds from the company if you are the owner (but not an employee or a director) is by payment of dividends - and you need to have sufficient 'distributable profits' to allow that to happen. Does the company have those profits, given it has been dormant (or more accurately not trading) until recently?

You/your husband are paying the accountants. Why are you letting them brush you off? 

Marcon

How are you getting on with sorting this out @sylviad_2? It really would be a good idea, probably starting with new and more helpful accountants as you don't seem happy with the current ones. It really isn't that difficult and should be plain sailing once the few current issues are resolved.