Private Limited Company - Low Turnover - Tax/Salary Query
matt10101
Posts: 6 Forumite
in Cutting tax
Hi, hypothetical:- lets say Bobs wife setup a Ltd. company to offer mobile beauty treatment services. She incorporated and had her first client in 07/2017.
In the months between 07/2017 and 03/2018 she has total sales of £2000, of that about £250 was the cost of supplies, £200 the cost of travel, with the remainder being monies she would like to pay herself.
Now monthy sales/expenses/travel varied a little month to month, so the amount she would like to pay herself is a variable.
At no month would this figure be great enough to require her to pay herself via PAYE (checked this on gov uk / PAYE for employers).
Can she simply list the remaining numeration as salary for the purpose of her coporate tax filing, then pay herself this money, and declare it via self assessment as an employee?
As all monies involved are such small sums the main concern is not having to give any away to an accountant/PAYE subscription services etc.
Any advice greatly appreciated!
In the months between 07/2017 and 03/2018 she has total sales of £2000, of that about £250 was the cost of supplies, £200 the cost of travel, with the remainder being monies she would like to pay herself.
Now monthy sales/expenses/travel varied a little month to month, so the amount she would like to pay herself is a variable.
At no month would this figure be great enough to require her to pay herself via PAYE (checked this on gov uk / PAYE for employers).
Can she simply list the remaining numeration as salary for the purpose of her coporate tax filing, then pay herself this money, and declare it via self assessment as an employee?
As all monies involved are such small sums the main concern is not having to give any away to an accountant/PAYE subscription services etc.
Any advice greatly appreciated!
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Comments
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As all monies involved are such small sums the main concern is not having to give any away to an accountant/PAYE subscription services etc.
For PAYE see here
https://www.gov.uk/topic/business-tax/paye
Basically, PAYE has to be done online. The Ltd co has to register as an employer, you need to download HMRC Basic PAYE (it's free) to do so.
Personally, I'd have suggested that this was too much faffing about in the circumstances. Being a sole trader is more straightforward.0 -
Are you sure? as on the "PAYE and payrool for employers" link on the page you linked it states:
The above all holds true in my hypothetical scenario?You don't need to register for PAYE if none of your employees are paid £116 or more a week, get expenses and benefits, have another job or get a pension. However, you must keep payroll records
(sorry i can't link directly as new to the forum)0 -
Are the travel costs paid directly by the company or does she claim them from the company. If the latter then they are expenses in your definition above
If the former there may be a BIK consideration0 -
Travel costs paid directly by company?
I should note in my scenario I am trying to work out the most hassle free way to do this properly.0 -
I think the most hassle free way considering the turnover is ditch the Ltd Co and go sole trader.0
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unforeseen wrote: »Are the travel costs paid directly by the company or does she claim them from the company. If the latter then they are expenses in your definition above
If the former there may be a BIK consideration
The means of payment of any travel expenses doesn!!!8217;t generally make any difference when it comes to determining if the payments are a BIK. If the travel was legitimate business travel or travel to a temporary workplace then it!!!8217;s fine to do it either way. It would only be a BIK if it didn!!!8217;t meet the rules for business travel
Because legitimate travel expenses are now covered by exemptions and aren!!!8217;t reported on a P11D anymore I don!!!8217;t see how it would impact the requirement to register for PAYE either.
That said I completely agree with you that the business turnover seems way to low to be incorporated for tax purposes and OP!!!8217;s wife should seriously consider becoming a sole trader.0 -
In our hypothetical scenario, Bob's wife thinks clients will prefer to see that they are dealing with a company (even if this isn't the best approach to things), and Bob doesn't want to disagree with his wife on this one..
The incorporation has already been done, and Bob's wife is already registered for self-assessment, so is Bob good to:
1. forego PAYE?
2. Submit the corporate tax filing with supplies, travel, and all remaining money from sales as salary, so sales=expenses?
3. Tell his wife to file self assessment for the salary?0 -
Does Mrs Bob ever employ anyone else?
Why does Mrs Bob need to suit a tax return (assuming she hasn't already been sent a notice to file one)?
How is Mrs Bob building any State Pension entitlement?0 -
In our hypothetical scenario, Bob's wife thinks clients will prefer to see that they are dealing with a company (even if this isn't the best approach to things), and Bob doesn't want to disagree with his wife on this one..
In that case, as Bob's wife obviously thinks she knows better than Bob on this one I'd suggest that Bob justs keeps his nose well clear and let's her get on with it .....0 -
so your wife wants to end up with a company that has zero profit because all available surplus cash has been drawn out as a pay cost leaving nil profit in the company and so no corp tax liability nor any reserves from which to take a dividend instead?In our hypothetical scenario, Bob's wife thinks clients will prefer to see that they are dealing with a company (even if this isn't the best approach to things), and Bob doesn't want to disagree with his wife on this one..
The incorporation has already been done, and Bob's wife is already registered for self-assessment, so is Bob good to:
1. forego PAYE?
2. Submit the corporate tax filing with supplies, travel, and all remaining money from sales as salary, so sales=expenses?
3. Tell his wife to file self assessment for the salary?
Presumably you have factored that into your wife's overall assessment of her total taxable income from all sources for her self assessment? No point the company avoiding 19% tax if she ends up with 20% basic rate anyway on employment income.
It's possible, given i note your careful selection of a t/o that is below the income tax threshold, and a salary level that is below the requirement to file under PAYE. personally however I think you run a risk that if HMRC ever inspected (though why would they for such low t/o) they would say the variability means it cannot be a salary and must be a director loan account "withdrawal", which can only be cleared by declaring a dividend....0
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