I know there's better places to ask this but I'm not signed up to them, so before I do, maybe someone here knows the answers...
I formed a limited company in May and took a contract which has now ended. Although I'm looking for work I don't expect to find anything for at least a month, maybe much longer.
I'm a director of my company, and also have been an employee, paying myself the "recommended" salary. As the contract has ended I intend stopping paying myself a salary, which will leave money in the company which I know I can take as a dividend ( - I'll leave enough in the company to cover obligations).
So I asked my accountant for a P45 which he's sent me. My thinking being when I have to do my personal tax return then there is a finite start and end date etc, and I didn't want to pay myself indefinitely from a limited pot of money.
Was that the right thing to do? What do I do with the P45? (Presume the dole will want it if I sign on...)
And If I get another contract I'd get a P45 from the dole office and hand to my accountant to start as an employee again?? Is that the right general theory?
|
What you could do is make yourself redundant and use the money still in the company to pay yourself a redundancy payment, which means neither you nor the company pay tax on it (up to 30k, obviously).
|
>> What you could do is make yourself redundant and use the money still in the
>> company to pay yourself a redundancy payment, which means neither you nor the company pay
>> tax on it (up to 30k, obviously).
But wouldn't that create a problem on being 're-employed' when another contract comes along?
Last edited by: Bromptonaut on Thu 29 Dec 11 at 10:53
|
No he cant do that, he wont be able to work for them again*, and would have to dissolve the company and form a new one for the next contract.
If he did the redundancy becomes taxable.
|
Where's Mapmaker when you need him?
|
Yeah if you need a tax fiddle creative accounting he is your man.
|
Reckon your accountant is the best person to ask.
|
"Reckon your accountant is the best person to ask." - you don't know my accountant - he will be getting the bullet at the end of the tax year...
btw I considered redundancy but chose against for the reasons above.
Also considering whether it's worth putting the lump sum which is sitting in the company straight into a pension provision of some sort instead of taking a dividend. Having seen the value of many years of quite substantial pension contributions going further and further south over the past two years, I'm not feeling inclined to chuck good money after bad.
Last edited by: smokie on Thu 29 Dec 11 at 11:16
|
Mapmaker? Lost presumably !
For what it's worth I didn't pay myself a salary at all when I was self-employed. Just drew down whatever the business could afford once a year. My accountant was quite clever about telling me when to do it to get the longest possible window before any tax became due. Good accountants are worth every penny.
|
There's technically nothing to stop you being made redundant and then re-employed by the same company while maintaining the tax-free redundancy payment. If the circumstances surrounding the original redundancy were genuine, and the re-employment / new role were not forseeable at the time then it'll be fine; circumstances do change after all.
However expect HMRC to look at it very closely indeed, and the shorter the gap between redundancy and re-employment the closer they'll look. So there'd better be a robust defence. In this case it would be unlikely to be defendable, on the grounds that, since it's his business, its entirely forseeable that he'd be seeking new contracts, and thus the redundancy payment woud be taxed, as Z says
Peter
|
|
What Peter says. That's clearly taking the mickey.
|
Contracting and end of contract - Fursty Ferret
