I have just been told by a new client that they have found that their old accountant has been declaring wages via RTI, which have never paid, year on year. These unpaid wages have always been accounted for via liabilities on the balance sheet, but have been run through the business to give the person NI contributions for pension rights.
I assume that the person is a director in which case the wages are paid to the DLA as though they has been paid and then invested in the company.
If an employee other than a director then the company still owes the person the unpaid salary so the person is a normal creditor of the company (so B/S liability)
The person must declare their income and pay tax and NI as normal (If a self assessment is prepared they must have been shown on that as though received).
I stand to be correted but I see no issue with this.
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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.
Hi Johnny, no idea what you wrote as I was typing.
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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.
Agree with Shaun. Do this all the time for Directors, just shifting it to the DLA at the appropriate time. Has historically been a good part of the overall tax planning tools.
Be interested to hear if it is a Director or not, plus if not, what the client was signing off, as this would be clearly posted in the full year end accounts as in the detailed P&L as well.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Hi All,
Many thanks for your replies. Sorry, on reading my post again, I haven't been as clear as I should have been. It's been the director's wife (non Director/Shareholder) who has been paid but no cash ever being exchanged. I haven't seen the full accounts as yet to see what's happened. There's no tax or NI involved so I don't see a major issue with it, but thought I'd running it by you for your opinions.
Thanks again
Debbie
If it's shown on the balance sheet as outstanding then that's fine accounting wise , although the accountant should have sought permission from the client to do it (maybe he did at the beginning and the client's forgotten about it.
The outstanding amount can be repaid without any tax liabilities (it's already been accounted for in previous accounts)
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
