Invoicing own LTD company as sole trader

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blueball2
blueball2 Posts: 4 Newbie
edited 19 July 2019 at 7:53AM in Cutting tax
Hi,

I have a startup LTD company that deals with property management. As the sole director my job is that of running the company, book keeping etc.

We have a small number of staff that do work for us and invoice for their time. They are all self employed.

I'm also self employed and registered as a sole trader.

As the company is very small, to help out with it's growth I would like to do the occasional odd job myself. Say for example I went into a property and did an end of tenancy clean, could I then invoice my own company for the service. That money would then be declared on my self employed tax return as income.

I'm not planning on cleaning out the companies account every month with fake "jobs", instead I'd like to earn say £50 - £100 a week doing the odd bit of work, real work that's documented and accountable. As the money I'm asking for is miniscule I don't want to go down the route of making myself an employee yet.

My main question is how would HMRC see this. Would they say I'm extracting capital, what are the rules? The company is not in a position to start paying dividends, it's only been trading for 2 months however we are on a positive trajectory in terms of finances, my business will be in profit by month 6.

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  • Pennywise
    Pennywise Posts: 13,468 Forumite
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    You can't. You're a director, you pay yourself wages through the company payroll.
  • 00ec25
    00ec25 Posts: 9,123 Forumite
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    they would see it as you drawing a wage without the company running a payroll and (subject to the amounts) paying employer's NI

    the tax impact for you is neutral since it is at the end of the day personal taxable income and by the sounds of it the company is not yet of a size where it is more tax efficient for you personally to take money from the company in the usual manner (wage + dividends)
  • Cook_County
    Cook_County Posts: 3,085 Forumite
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    On what basis are the other "staff" self-employed?
  • tebthereb
    tebthereb Posts: 162 Forumite
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    It’s a high risk of HMRC saying it’s a director salary but I think if there is a genuine engagement between you and the company, separate to the relationship of company and director, what you suggest could be done.

    However, I would be more inclined to award yourself a basic salary that is tax and NIC free and/or take a loan which you later clear with dividends once you have the reserves.

    As always, I would speak to your accountant / tax advisor.
  • Sibbers123
    Sibbers123 Posts: 324 Forumite
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    Directors are office holders and automatically fall within employment tax legislation via s.5 ITEPA. You are therefore remunerated by a salary. HMRC will challenge this successfully otherwise all directors would do this and avoid employers NIC.

    There is free payroll software out there and I am sure your accountant would do this for you with a small additional charge.
  • tebthereb
    tebthereb Posts: 162 Forumite
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    You are right about office holders being caught but this doesn’t mean they can’t be separately engaged by the company in another capacity.
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