Urgent advice on corporation tax

[Pika1971]

Hi Guys,

I urgently need some advice on Ltd company corporation tax.

I started a ltd company on January 6th 2006, at the time my accountant told me that I would pay corporation tax on any money over 10k in the company account on jan 6th 2007, so it would be wise to pay myself a large dividend before the end of the year to avoid some tax.
I am the only employee and the only shareholder so I have been paying myself a low basic wage and taking dividends each month, now one year on I have a fair bit more than 10k in the business account and I am worried that I am going to hit hard by the tax man. My accountant says not to worry and it doesn't matter how much I have in the account I am going to pay tax on it whatever. I am confused and I don't understand whether I should be reducing the amount of money in my companies account or not.

I apprieciate that this has nothing to do with toyota's but I just hoped someone might know something about it and be good enough to give me some advice.

Thanks guys

[logey79]

if it's been through the account, then you'll end up paying the tax on it anyway. i'm almost certain thats the case, but hey, i'm no accountant. keep whats in the account as low as you can, and only start piling it in there for the three years before you want to sell the business.

[BUSHWHACKER]

http://www.businesslink.gov.uk/bdotg...cId=1073859200

[Apache]

Hi mate. Dont have a clue, but where abouts in Worcestershire are you, and what business are you running?

[MattF]

You'll get taxed one way or the other, so don't worry. At least you've got some money in the business account to pay the bill with. See, it has a plus point

[Taliesins]

[QUOTE=Pika1971]Hi Guys,

I urgently need some advice on Ltd company corporation tax.

I started a ltd company on January 6th 2006, at the time my accountant told me that I would pay corporation tax on any money over 10k in the company account on jan 6th 2007, so it would be wise to pay myself a large dividend before the end of the year to avoid some tax.
I am the only employee and the only shareholder so I have been paying myself a low basic wage and taking dividends each month, now one year on I have a fair bit more than 10k in the business account and I am worried that I am going to hit hard by the tax man. My accountant says not to worry and it doesn't matter how much I have in the account I am going to pay tax on it whatever. I am confused and I don't understand whether I should be reducing the amount of money in my companies account or not.

Corporation tax is paid on the amount of profit the company makes. ie No profit no tax large profit= Tax.

[Ace Piker]

You can invest it back into the company in the form of company assets, possibly a shiny 3rd Gen?

Seriously though, if you reinvest into the company and make minimal profit, the only time you will pay corporation tax is when you sell the company. Any assets that you purchase will also depreciate over time allowing you to write them off. Your accountant should know this.

[MattF]

You can invest it back into the company in the form of company assets, possibly a shiny 3rd Gen?

With things like that, though, it is only a percentage of the cost which is offset per year for so many years from the initial amount spent on the purchase, is it not? (I usually go braindead when the accountant starts explaining things).

[Ace Piker]

With things like that, though, it is only a percentage of the cost which is offset per year for so many years from the initial amount spent on the purchase, is it not? (I usually go braindead when the accountant starts explaining things).

Yeah, but it ties up the capital, hence no gapital gains. That's why you see builders driving shiny R%£ge R%$£rs etc!

[Gamedawn]

You pay corporation tax on any profit the company makes at a rate of 19% (up to a band limit that I can't remember). The general rule is to pay yourself a salary equal to your tax allowance each year and then top up the rest as dividends, As dividends are payed from company profits it means you pay no income tax on your salary and the company pays 19% on the dividends. The other advantage is that corporation tax is not due until (I think) 9 months after the end of the financial year on which it is levied. Finally, because you are on such a low salary the goverment takes pity on you and pays your NI, etc for you.

Warning - I'm not an accountant, just a simple engineer, but I think the above is correct. If not please send a file in the cake.

[BUSHWHACKER]

You pay corporation tax on any profit the company makes at a rate of 19% (up to a band limit that I can't remember). The general rule is to pay yourself a salary equal to your tax allowance each year and then top up the rest as dividends, As dividends are payed from company profits it means you pay no income tax on your salary and the company pays 19% on the dividends. The other advantage is that corporation tax is not due until (I think) 9 months after the end of the financial year on which it is levied. Finally, because you are on such a low salary the goverment takes pity on you and pays your NI, etc for you.

Warning - I'm not an accountant, just a simple engineer, but I think the above is correct. If not please send a file in the cake.

You been talking to Jeffery Archer again?

[gillcover]

just been scratching

Hi just been moochin about the net and saw a thing saying £0 to £300,000 for 06/07 19% tax rate..but you may be able to claim 100% relief for first year start up. I always thought an accountant was to try and reduce taxes etc, advise the best options , think I'd be looking for a new one soon if twas me

[AJP]

I am a contractor to the automotive and areospace industries and as such I am basically a one man limited company but to keep the tax man off my back I use an umberalla / composite company.

Technically I pay myself minimum wage and then the rest split between expences and dividend. As far as I am aware I do not pay corperation tax as ALL my incoming and out going money is balanced off. Anyway the company I am set up as do it as a service for me and they work out cheaper than an accountant.

[AuldNick]

The amount in the bank has nowt to do with tax it's PROFIT only that gets taxed, thats why you need a good accountant

Again I aint an accountant but I employ a goodun

[gillcover]

reply

Hi
Just wondering ,you say you contract to auto /aero Ind's and also you are
a limited Co ,could you clear this up for me ,,, contractor or director of own Co,,,,? the reason I ask is ,and you probably now this, sub-cons dont pay corp tax .Maybe it's me missing something here???????