Rectifying Accounts

[chapalc]

Hi, I'm a contractor/consultant with a LtdCo and a problem. The LtdCo had excess funds in year end 2006 and 2005. When the end of year accounts were prepared for those years my accounting company attributed those excess funds as "bonuses" due to the director (me). I never took payment of these "bonuses", instead I continued to draw a normal salary and pay PAYE&PRSI on that.

I understood (incorrectly) that the LtdCo could roll over excess funds into the next year as a buffer for possible lean-years. I now understand that *any* excess funds at end-of-year must either be recorded as a bonus to me, and hence incurs PAYE&PRSI, or recorded as profit and hence corporation tax is due.

My question is: can the accounts be rectified to reflect these excess funds as profit instead of as "bonuses" due to me?

Any help or advice appreciated.

(I accept that it was my own ignorance and responsibility to be aware of how these things work, so advice along the lines of "you should have done X, Y or Z" is not really that useful).

 

[ubiquitous]

Have you discussed this with your accountant? What have they told you?

 

[mathepac]

One way or another, there are taxes and probably penalties due on the sums for those years.

Could you discuss with your accountant a tax-efficient way of utilising these sums in future as personal and or company pension contributions perhaps? (you save personal tax and prsi on them).

I'm amazed your financial advisors didn't engage you in conversation about these funds before the present circumstances arose.

 

[chapalc]

I've been told that the PAYE&PRSI calculated for the "bonuses" are outstanding and must be paid. In effect, when I thought I was drawing normal salary in 2007, that I was actually drawing delayed payment of the "bonuses".

(note I quoted incorrect dates in my original post, the "excess funds" were in years ending Oct 2005 and Oct 2006).

 

[capall]

If the excess funds are left as income in the company then you pay corpo tax plus if you leave the money in the company for longer than 18 mths you pay a surcharge ,plus you still have the problem of eventually extracting then money out of the company.
There is no real options for one man service companies except to pay out money as salary or put into a company pension scheme.