Ltd company advice

[dave1]

Hi there can't reach my accountant any my year end is near.

Last years accounts I had drawn to much on dividends so they moved £2000 over onto this financial year they have told me that the £2000 needs to be sat in the account at the point of the year end. What happens to the money that's sat there when my new financial year starts can it be spent. Thanks

 

[Iron Giant]

@Part Timer is your man

 

[Part Timer]

Hi there can't reach my accountant any my year end is near.

Last years accounts I had drawn to much on dividends so they moved £2000 over onto this financial year they have told me that the £2000 needs to be sat in the account at the point of the year end. What happens to the money that's sat there when my new financial year starts can it be spent. Thanks

@Part Timer is your man

I would think it could be but I'd advise waiting till you get their advice. What I don't understand is how did you draw to much on dividends.

 

[Part Timer]

Hi there can't reach my accountant any my year end is near.

Last years accounts I had drawn to much on dividends so they moved £2000 over onto this financial year they have told me that the £2000 needs to be sat in the account at the point of the year end. What happens to the money that's sat there when my new financial year starts can it be spent. Thanks

But how, the only way you can take too much money out of your business with dividends is if you're company can't afford it and you, as a Director, jeopardise it's liquidity, and can therefore lose the Limited liability aspect, or you have gone into the 40% bracket. Very strange your Accountant has given you this advice if it doesn't fall into either one of these.

 

[stevo1]

I'm guessing you didn't leave enough in the bank to pay your cooperation tacmx hence why they've moved it across to the next year

 

[P4dstar]

I think I can see what he’s saying here. You leave the 2k in the account and that will be profit. You then need to pay corporation tax and THE COMPANY can spend what is left.

If you imagine you were working for a large company but you were responsible for paying yourself. Last year you took an additional £2k. You have been told this needs to be returned this year. He moved the monies into this financial year so they you weren’t taxed on non existent monies. So essentially you’ve started this financial year, personally, £2k down. Whatever you would normally earn you need to take 2k less (in theory, many accountants seem to make up their own rules)

Don’t stress about it being the end of the year. Surely you’ve time before your submission is due? I imagine it’s due the end of Jan? That poses another problem though. If it is due the end of Jan we’re talking about a different tax year.

 

[Part Timer]

I think I can see what he’s saying here. You leave the 2k in the account and that will be profit. You then need to pay corporation tax and THE COMPANY can spend what is left.

The company would pay corporation tax on the dividends anyway as they're not an expense

 

[P4dstar]

The company would pay corporation tax on the dividends anyway as they're not an expense

Yeah that’s what I’m thinking. First put the 2k back into the bank. Then pay corporation tax on it. Then whatever is left can be taken as a dividend or spent by the company?

 

[dave1]

The account was 2k short of having the funds on year end to pay Corp tax. Totally my fault but the accountant said they moved the last dividend that I made on last day of my financial year to the next year. So they said to make sure mistakes aren't made again and to make sure the tax and the 2k dividend money are in this time. But I want to know if once the year is other what happens to the 2k sat there can it be spent.

 

[P4dstar]

The account was 2k short of having the funds on year end to pay Corp tax. Totally my fault but the accountant said they moved the last dividend that I made on last day of my financial year to the next year. So they said to make sure mistakes aren't made again and to make sure the tax and the 2k dividend money are in this time. But I want to know if once the year is other what happens to the 2k sat there can it be spent.

You’re going to have to hit your accountant up on this one mate. Both myself and PT have tried to simplify it and explain what we think, if you got nothing from those responses he might be able to explain it in a way you understand. My accountant often has to tell me things several times for me to understand it. When he starts talking about writing down of assets for capital gains I ask him to move on. I don’t understand that, it’s not worth me paying him if I have to take the time to learn it.

 

[Part Timer]

The account was 2k short of having the funds on year end to pay Corp tax. Totally my fault but the accountant said they moved the last dividend that I made on last day of my financial year to the next year. So they said to make sure mistakes aren't made again and to make sure the tax and the 2k dividend money are in this time. But I want to know if once the year is other what happens to the 2k sat there can it be spent.

Ok, so you took too much money out and couldn't pay the bills. A Ltd company means your liabilities are Limited but not totally. This type of financial management can get you into a lot of trouble.

 

[Pjj]

You’re going to have to hit your accountant up on this one mate. Both myself and PT have tried to simplify it and explain what we think, if you got nothing from those responses he might be able to explain it in a way you understand. My accountant often has to tell me things several times for me to understand it. When he starts talking about writing down of assets for capital gains I ask him to move on. I don’t understand that, it’s not worth me paying him if I have to take the time to learn it.

Quite agree ime very good at running a successful business but haven’t got a clue with VAT and all the tax stuff etc that’s what I pay the accountant for I leave it up to him and focus on the day ti day stuff that one good at .

 

[P4dstar]

Ok, so you took too much money out and couldn't pay the bills. A Ltd company means your liabilities are Limited but not totally. This type of financial management can get you into a lot of trouble.

This seems relatively simple to me, you’ve spent 2k you shouldn’t have spent. Put it back!

The last couple of years mine has always been the other way. The directors loan balance has kept growing. Time for it to come down a bit!

The one thing I never understand in these scenarios is how you overspend by anything. The money has to exist in order to spend it. If it existed then you can just declare it and pay tax on it like normal. It seems the accountant has made some tax saving amendment which has left Dave confused. I think they would have been better spending time educating him on how to manage the businesses finances?