There are three ways of drawing money from a company – as expenses, as salary and as dividend.
Expense claims must be accounted for and be supported by the relevant invoices and receipts. Payment of salary is subject to PAYE and must be supported by a payslip. Payment of dividends must be supported by dividend vouchers and minutes prepared by us. If you are using Competex FreeAgent, the dividend documentation will be created automatically by the software.
The company can make a loan to a director, but if the total loans exceed £10,000 (£5,000 for tax years up to and including 2013/2014) approval by ordinary resolution of the shareholders is required. S419 income tax is payable on any loan unless it is repaid within nine months of the end of the company year in which the loan is made. Any loan of over £10,000 (£5,000 for tax years up to and including 2013/2014) must be declared on the director’s P11D and income tax on a deemed interest charge must be paid by the individual for the period of the loan.
Each year we will send you a year-end reply sheet in which we will ask you to check that all money paid out of the company into your personal account has been correctly accounted for. If you have drawn any money from the company that should be treated as salary in the tax year, it is vital that this is processed as salary before payroll is closed for the relevant tax year.