I have a new client who is a limited company and has one employee. At the minute she is taking money out of the company as and when she needs it as drawings. Does she need to be on the payroll? and also can a director take drawings even if the company is not making a profit yet and will this count as dividends at the end of the year.
Drawings are something applicable to the self employed, not to limited companies.
Any withdrawal from the company is taken against the directors loan account which must be cleared (usually via a dividend) by the year end.
Dividends as you note are only available from profit so if she is not making any then she would not be able to clear the DLA through the company so the loan would become a taxable benefit.
As a director of the company with a very few exceptions involving directors having other employments then the director is an employee of the business so a payroll would need to exist even if the director is paid below the tax threshold (how else would you complete their self assessment?).
The good news is that minimum wage legislation is not applicable to directors.
In addition to the above, you say that she is a one person ltd. Is IR35 applicable to your client as that changes the scenario somewhat (Dividends go out the window).
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
