Hi Lianne

He had previously been trading as a sole trader but decided to change to Ltd (doing the same work) Hes registered with companies house and opened a new bank account solely for the business but hes unsure of what date he wants to officially start trading as ltd from? Obviously he has been continuously trading so is there a particular cut off that would be sensible to go with? First transaction through business bank account perhaps? 

I would usually start to trade on the 1st day of the month following incorporation, to keep a nice straight edge on things, but there's nothing wrong with starting on the day of incorporation. I tell HMRC the trading date is the day of incorporation because it rarely makes much difference, especially if you shorten the period, as I explain below.

 

Also, what would be the best method to move everything he already owned and uses for the business into the new books? e.g equipment?

He can "sell" it to the company at market value, or elect to transfer it at tax written down value.  Selling it at market value may result in tax being paid personally, and the company will only gain 18% capital allowances on qualifying assets, because its a related party transfer.  

  

And lastly, dividends? Hes paying himself straight from the business account into his personal account. Im aware its best to keep under the personal tax limit etc but how is he best to manage that now hes been doing much larger transfers to his personal account for the last 2 months?

Before you think about wages through the company, you will need to determine what his taxable income from the sole trader will be.  If he has used all his personal allowance, there's no point in setting up a PAYE scheme until 06.04.16.  If there is profit left in the company, after corporation tax has been deducted, he can take this as dividend.  If he has some personal allowance left over, set up a PAYE scheme and put him on directors cumulative, then divide his leftover personal allowance by the number of months remaining and pay him that each month.

If you are not very sure of what you are doing, I always recommend shortening the first period to 31.03.16, because it will run in line with all the tax years, and save you having to apportion everything.

Of course, if you really dont understand it, its best to do his bookkeeping, then have an accountant do the accounts and tax return.

 

Hope this helps! Good luck!

 

 

Hi Lianne

Tbh Im pretty sure he will have used up his personal allowance as the business seems to be quite profitable at first glance. If this is the case is he best to continue just paying himself via bank transfer as wages until 06.04.16? Im also quite sure he will continue to transfer large sums of money over each month rather than hold on until paying corporation tax. As Im sure there will be profit left in the company is there a sensible way to record these as dividend payments - in advance? Certaines keen to have a reasonable income immediately.

Just to be sure you understand the concept of wages, dividends and monies drawn -

Wages go through payroll 

Dividends are voted from the profit reserve (after tax)

Any money taken goes as a debit to his directors account, and the above are credits

The money he is taking from the bank is a loan.  Dividends are used to clear that loan, when wages cant be taken.  Wages and divi's clear the loan when a PAYE scheme is in place.  You might also find things are paid privately, and mileage is incurred.  These are credits to the directors account, as capital introduced.  They reduce any monies owed to the company too.

Everything gets lump in, and your aim is to create the lowest overall tax bill possible, and, keep his "loan" under £10k at the end of the month - otherwise he should be completing a P11D for a beneficial loan benefit in kind.  If his loan is still outstanding at the year end, he could pay 25% tax on that.  It is refundable, once the directors account reaches NIL again, or goes into debit (where the company owes him) 

If the sole trader profit is more than £10,600 then wait til next year to start the company PAYE scheme. If there is ample profit in the company by 31.03.16, you can show dividends that take him up to the top of the basic rate band.  However, if he draws more than you can vote, to keep him in the BR band, he will end up with an overdrawn directors account (credit balance at year end).

Im seriously considering taking on the bookkeeping but Im not registered for MLR at the moment and with Christmas merely days away Im not keen on additional expenses of my own atm!! Is there a time frame Id need to be registered by if I took on some work? Or do I need to register before I start officially?

Register before you start, and consider professional indemnity insurance.  Also consider whether any memberships to accounting bodies place any restrictions on what you can do.

 

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here's some reading to get you into the way of thinking...

https://www.gov.uk/directors-loans/overview

http://www.kfaccounting.co.uk/directors-loan-account/

http://www.rossmartin.co.uk/companies/checklists/489-directors-loan-account-toolkit