Has your Christmas party exceeded HMRC rules? Check now!!

A limited company is a separate legal entity from the individuals that own the shares.Any trading receipts belong to the company and directors should not just “help themselves” to the funds, in the same way as is possible if trading as a sole proprietor or partnership. There are various methods of extracting the funds, in both a legitimate and tax advantageous manner.These generally revolve around the use of salary, dividends, interest on loans by the directors to the company, pension contributions etc. But get it wrong and you could end up paying thousands of pounds in extra tax and National Insurance.Unfortunately, we quite often see inefficiencies. These include:

Excessive salaries being drawn when dividends would be more beneficial
No salaries at all being paid to directors so no entitlement to state pension benefits is being recorded
Dividends being paid when there are no profits to justify these
Large pension contributions being paid when the company has losses so no immediate prospect of tax relief on these
Paying dividends in the wrong periods
Backdating dividends into a previous year (not legal!)

Please do seek advice on the best way to structure the withdrawal of funds from your company. Don’t wait until after the company year end!

Has your Christmas party exceeded HMRC rules? Check now!!

Watford

London (West End)