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Post Info TOPIC: Recording Interest Paid to Director in Sage


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Recording Interest Paid to Director in Sage


I'm struggling with the correct way to record interest paid to a director.

I know I need to record this on form CT61, but this question relates only to sage.

 

Currently interest is calculated monthly dr NC 7902 Director Loan Interest and cr NC 2109 Accruals 

Keeping things simple, Loan interest pa is £1,000 paid yearly. I need to pay HMRC £200 (20%) and the Director £800. But I have full £1,000 in 7902, but I'm sure I should separate net and tax. So I think I'm right to say 7902 should be net, but where should I allocate tax ?

Thanks

Michael 

 



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What does your Accountant suggest Michael?

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The loan interest is surely being 'paid' monthly!

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Joanne  

Fallows Hall Ltd 

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Casu wrote:

What does your Accountant suggest Michael?


 I don't have an accountant, hence the question.



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Cheshire wrote:

The loan interest is surely being 'paid' monthly!


 

Calculated monthly to smooth the accounts, but I only need to pay yearly. That's my understanding from form CT61



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MichaelWGroves wrote:
Cheshire wrote:

The loan interest is surely being 'paid' monthly!


 

Calculated monthly to smooth the accounts, but I only need to pay yearly. That's my understanding from form CT61


 Oh dear. That would be wrong then.



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Joanne  

Fallows Hall Ltd 

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Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



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What would be wrong?


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Hi Michael,

I don't know if this is too late, but we record it as Dr 7903 (loan int paid) gross, cr 2213 (loan int liability) net, cr 2212 (Income tax on interest paid) tax amount

 



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Nicola



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No, not too late, first valid response.
I'm in agreement with Dr 7903, same as me.
I also see why you Cr 2212, this sort of answers my question as I was thinking of doing the same. But should 2213 not be in Accruals?
In the end I Cr 100% Accruals, then cleared once paid. I think I'm splitting hairs a little as I believe they both have the same effect for me as I clear at year end to maximise interest allowances.

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MichaelWGroves wrote:

No, not too late, first valid response.
-------------------------------------------------------------

 

Wholly inappropriate comment!

 

Casu's response was wholly appropriate  - the hint that you need an Accountant. Not a bookkeeper, an Accountant.

 

Just because you didnt understand my comment does not make it invalid.

 

Because I chose not to respond further to your query asking for clarification does not make it inappropriate.

 

I chose not to respond becuase frankly I think you have had enough free advice from this forum,  which is quite clearly for professionals to exchange ideas and not for business owners to get freebies.  

 

You are wrong in your latest suggestion. But quite clearly you do not know what you do not know, because you have not done the relevant training.    Limited company Accounting/tax is completely different to Sole trader accounting.

 

You dont make entries to 'smooth' the accounts.

 

Plus lets face it do you know who has the relevant experience on here as to whether you can trust them or not with the answers you are getting.  Purple is correct, slight difference in nomninal codes but you are absolutely NOT splitting hairs with your suggestion, they do not have the same 'effect'.   

I go back to my original point, from Jan 7 15:13 2019, which remains pertinent.

This is not just a 'sage' question, but one that impacts on your final accounts, CT and personal tax. Why oh why should we give free advice to soemone who clearly doesnt want to pay for an Accountant?

 

 



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Joanne  

Fallows Hall Ltd 

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Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



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Your comments come across as very elitist, this is an open forum.

If you don't know the answer, or don't feel the poster is worthy of your time, simply don't post.

You proclaimed something was wrong, but did not back up your argument, therefore this comment is worthless.

If you want to debate the question in hand I'm happy to move forward, but trading insults has no value on a forum.



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MichaelWGroves wrote:

Your comments come across as very elitist, this is an open forum.

If you don't know the answer, or don't feel the poster is worthy of your time, simply don't post.

You proclaimed something was wrong, but did not back up your argument, therefore this comment is worthless.

If you want to debate the question in hand I'm happy to move forward, but trading insults has no value on a forum.


 Hi Michael 

Perhaps you'd like to read the rules of the forum.  Point 1 is very pertinent.   https://www.book-keepers.org.uk/t10583966/forum-rules-and-privacy-policy-please-read-before-making-a-p/

It isn't the first time that folks have suggested using an accountant, and for something like CT61's, their advice will be invaluable. As it is, you've made an error in one of your assumptions, and that could cost you a pretty penny should HMRC bring it to light.

We are here to help our fellow bookkeepers and accountants, not to offer free advice to business owners.  I can't see where Joanne insulted you, but the comments are accurate and should be taken on board.



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John 

 

 

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Thank you for the rules, I confess I had not read before now but this clears up any confusion on membership "Membership of the forum is open to those with an interest in book-keeping and/or accountancy." 


I called HMRC CT61 department only this morning as this was my first CT61 and I wanted confirmation. They advised my assumptions were correct. Although interest is accrued monthly, as it is only paid yearly, the CT61 is only required yearly.


I was not insulted by Joanne, nor Casu. But before assuming I'm wrong or out of my depth a debate might be more appropriate.



-- Edited by MichaelWGroves on Tuesday 22nd of January 2019 03:25:45 PM

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MichaelWGroves wrote:

Thank you for the rules, I confess I had not read before now but this clears up any confusion on membership "Membership of the forum is open to those with an interest in book-keeping and/or accountancy." 


I called HMRC CT61 department only this morning as this was my first CT61 and I wanted confirmation. They advised my assumptions were correct. Although interest is accrued monthly, as it is only paid yearly, the CT61 is only required yearly.


I was not insulted by Joanne, nor Casu. But before assuming I'm wrong or out of my depth a debate might be more appropriate.



-- Edited by MichaelWGroves on Tuesday 22nd of January 2019 03:25:45 PM


 Accounting advice from HMRC?!  Classic error. What date did you take the loan out and what date is the interest paid?



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It's a directors loan, (Loan to Company)
It's only a partial accounting period as it's a new company, period is September 2017 to 31 March 2018.

Interest was accrued monthly, with the director being paid on 31 March 2018. HMRC advise the form should be completed for the period that the payment was made, not when it was accrued. They have a dedicated team for CT61 enquires 03000 518371

Part 1 or the form is for "Income Tax on annual payments, interest paid and alternative finance payments"

This all looks straight forward to me, am I missing something?


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I was looking at the right Company then smile

In the accounts, you are recording interest monthly, therefore quarterly CT61's are required. 

Out of interest (excuse the pun) when did you file the CT61 and pay the income tax, and have you included the interest payment in your SA return?



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John 

 

 

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MichaelWGroves wrote:

Your comments come across as very elitist, this is an open forum.

If you don't know the answer, or don't feel the poster is worthy of your time, simply don't post.    There are lots of posts that are really not worthy of my time including this one, not least spammers as an example, but I do post as it amuses me and I dont take being told what to do from you nor any one else (unless of course the moderator or ownre of the forum tells me otherwise.   I answered, from a position of knowing what I am doing. 

You proclaimed something was wrong, but did not back up your argument, therefore this comment is worthless.    Frankly that is insulting. Anyone with half a brain who is in the industry will know exactly what I mean without the need to back up my argument.  I wonder how many times you have asked someone to back up their argument when they actually provided you with answers you liked?  I am happy to provide legal responses when Im being paid.

If you want to debate the question in hand I'm happy to move forward, but trading insults has no value on a forum.       I would enter into a technical debate, but it is very clear from this post and others that it would be a one sided technical debate. Besides then when I have put my case forward you would have your answer which Im not prepared to give because then once again, Im saying, imo you have had enough free advice from this forum. 


 edited to add 'you liked'



-- Edited by Cheshire on Tuesday 22nd of January 2019 05:48:55 PM

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Joanne  

Fallows Hall Ltd 

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Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



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Leger wrote:

I was looking at the right Company then smile

In the accounts, you are recording interest monthly, therefore quarterly CT61's are required. 

Out of interest (excuse the pun) when did you file the CT61 and pay the income tax, and have you included the interest payment in your SA return?


 

CT61 is only required when you pay interest, not record it. This is what I was told today by HMRC CT61 department. However, as you are questioning this I am starting to doubt what I was told so I've done some reading.

The CT61 return advise on the top of page 2 "Part 1 calculate the tax payable on payments the company has made"
From this I must conclude if you pay yearly you do a single return. However, if it was paid quarterly you would be correct.

Posted and paid CT61 today, yes included in SA. On the down side I am very late so will be charged interest for the period it was late. Luckily there is not a fine so it won't be much.



-- Edited by MichaelWGroves on Tuesday 22nd of January 2019 06:02:58 PM

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MichaelWGroves wrote:

Thank you for the rules, I confess I had not read before now but this clears up any confusion on membership "Membership of the forum is open to those with an interest in book-keeping and/or accountancy." 


I called HMRC CT61 department only this morning as this was my first CT61 and I wanted confirmation. They advised my assumptions were correct. Although interest is accrued monthly, as it is only paid yearly, the CT61 is only required yearly.


I was not insulted by Joanne, nor Casu. But before assuming I'm wrong or out of my depth a debate might be more appropriate.



-- Edited by MichaelWGroves on Tuesday 22nd of January 2019 03:25:45 PM


 I think you have mis-interpreted 'those with an interest in bookkeeping and/or accountancy' with someone who is clearly looking for assistance in completing their Accounts and Tax Affairs.  The latter IS NOT what this forum is about.

No-one on here has a signed engagement letter from you and therefore cannot provide such advice.

Most of the questions asked by folk who do not know what they are doing are without doubt the wrong questions to ask. Generally folk will answer what is posed and not delve deep enough into the meaning behind the question and therefore the real issue at hand. Which is frankly why folk should not rely on google and forums to fully piece together their tax affairs.   Which is just one of the many reasons that you should never ever take what HMRC advise you to do as being gospel.  As Casu hit the nail on the head, taking accounting advice from HMRC is a joke.  Despite the dedicated phone number.   

I have assumed you are somewhat out of your depth because frankly it is obvious from your questions that you are.   I am sure you have some knowledge, but a little knowledge is dangerous.   

Do you think that you can learn via a few questions on here what fully qualified accountants and tax advisors take 10+ years to learn?  Is there not a reason that such knowledge takes a long time to be attained.

Would you consider taking your own appendix out if you viewed the operation and get the instructions from Google?

I notice that you didnt answer my question as to why Accountants/bookkeepers should answer your questions for free when you feel the need not to actually get your own and pay them?

 

 



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Joanne  

Fallows Hall Ltd 

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Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



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MichaelWGroves wrote:

CT61 is only required when you pay interest, not record it. This is what I was told today by HMRC CT61 department. However, as you are questioning this I am starting to doubt what I was told so I've done some reading.
The CT61 return advise on the top of page 2 "Part 1 calculate the tax payable on payments the company has made"
From this I must conclude if you pay yearly you do a single return. However, if it was paid quarterly you would be correct.

Posted and paid CT61 today, yes included in SA. On the down side I am very late so will be charged interest for the period it was late. Luckily there is not a fine so it won't be much.


You see you are just not reading stuff in the right places!!!!!!!!

You are very clearly not understand the Accounting side of what you have done, nor reading what folk have answered.

 

 

 



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Joanne  

Fallows Hall Ltd 

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Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.

 



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MichaelWGroves wrote:
Casu wrote:

What does your Accountant suggest Michael?


 I don't have an accountant, hence the question.


 

why not?   probably save you a lot of cash and save you from the mistakes you do not realise you are making



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Casu wrote:
MichaelWGroves wrote:
Casu wrote:

What does your Accountant suggest Michael?


 I don't have an accountant, hence the question.


 

why not?   probably save you a lot of cash and save you from the mistakes you do not realise you are making


 

A bit of background, I started supporting Sage from an IT perspective in early 90's, I used to work for pwc (C&LD back then). In 1995 I started to use Sage for my own company. I stopped using in around 2000, but continued to support until around 2010. Been using as user again since around 2010.

In around 2011 I had a meeting with a partner in a medium sized Accountancy firm to review my accounts as a sole trader. He advised he could not offer any value above what I was already doing. His exact words were "you don't need an accountant"

I accept my new company is now a limited company and there are some things I need to learn, but I don't see it as a big mountain to climb.

I'll need a few pointers on the way, and in the past the majority have come from BookKeepers Forum.



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MichaelWGroves wrote:

CT61 is only required when you pay interest, not record it. This is what I was told today by HMRC CT61 department. However, as you are questioning this I am starting to doubt what I was told so I've done some reading.
The CT61 return advise on the top of page 2 "Part 1 calculate the tax payable on payments the company has made"
From this I must conclude if you pay yearly you do a single return. However, if it was paid quarterly you would be correct.

Posted and paid CT61 today, yes included in SA. On the down side I am very late so will be charged interest for the period it was late. Luckily there is not a fine so it won't be much.


Hi Michael

According to your accounts (based on the information you have provided us with) you have debited 5 or 6 payments to loan interest paid.  Effectively that marks them as the dates you paid the interest.  If you only want to do one CT61 a year then only apply the interest once a year.

 



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John 

 

 

 Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.



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MichaelWGroves wrote:


 

A bit of background, I started supporting Sage from an IT perspective in early 90's, I used to work for pwc (C&LD back then). In 1995 I started to use Sage for my own company. I stopped using in around 2000, but continued to support until around 2010. Been using as user again since around 2010.

In around 2011 I had a meeting with a partner in a medium sized Accountancy firm to review my accounts as a sole trader. He advised he could not offer any value above what I was already doing. His exact words were "you don't need an accountant"

I accept my new company is now a limited company and there are some things I need to learn, but I don't see it as a big mountain to climb.

I'll need a few pointers on the way, and in the past the majority have come from BookKeepers Forum.


 Why not go back to the medium sized accountancy firm for your few pointers?



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Leger wrote:
MichaelWGroves wrote:

CT61 is only required when you pay interest, not record it. This is what I was told today by HMRC CT61 department. However, as you are questioning this I am starting to doubt what I was told so I've done some reading.
The CT61 return advise on the top of page 2 "Part 1 calculate the tax payable on payments the company has made"
From this I must conclude if you pay yearly you do a single return. However, if it was paid quarterly you would be correct.

Posted and paid CT61 today, yes included in SA. On the down side I am very late so will be charged interest for the period it was late. Luckily there is not a fine so it won't be much.


Hi Michael

According to your accounts (based on the information you have provided us with) you have debited 5 or 6 payments to loan interest paid.  Effectively that marks them as the dates you paid the interest.  If you only want to do one CT61 a year then only apply the interest once a year.

 


 If that is the case, I can post yearly. But to be sure I'm cr Accruals dr Interest paid monthly.

Year end dr Accruals and cr bank.

So surly I'm paying yearly, as it's not paid until it leaves the bank. Am I wrong? 



-- Edited by MichaelWGroves on Tuesday 22nd of January 2019 06:45:41 PM

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Casu wrote:
MichaelWGroves wrote:


 

A bit of background, I started supporting Sage from an IT perspective in early 90's, I used to work for pwc (C&LD back then). In 1995 I started to use Sage for my own company. I stopped using in around 2000, but continued to support until around 2010. Been using as user again since around 2010.

In around 2011 I had a meeting with a partner in a medium sized Accountancy firm to review my accounts as a sole trader. He advised he could not offer any value above what I was already doing. His exact words were "you don't need an accountant"

I accept my new company is now a limited company and there are some things I need to learn, but I don't see it as a big mountain to climb.

I'll need a few pointers on the way, and in the past the majority have come from BookKeepers Forum.


 Why not go back to the medium sized accountancy firm for your few pointers?


 

I don't feel the need to at this point. There's no reason why HMRC can't help me fill out a form, and the sage question should have been straight forward. My accounts are very simple.



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you are wrong. You are missing the point. You are not reading information correctly. You are looking in the wrong place for information.

Already said - not a sage question. said already you do not know what you dont know. So how do you actually know your accounts are simple? I wonder what else you have got wrong? I will wager there is more.

HMRC can help you fill in a form, but often get even that simple thing wrong. their staff do not have Accounting qualifications. Accounting comes before tax.

You clearly just want someone to say you are right.

or expect the professionals to give you free advice. Asked, not answered, why should they? On what basis should the same professionals you think you do not need, at this point, help you out for free, at this point?

No basis.





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Leger wrote:

Hi Michael

According to your accounts (based on the information you have provided us with) you have debited 5 or 6 payments to loan interest paid.  Effectively that marks them as the dates you paid the interest.  If you only want to do one CT61 a year then only apply the interest once a year.

 


 If that is the case, I can post yearly. But to be sure I'm cr Accruals dr Interest paid monthly.

Year end dr Accruals and cr bank.

So surly I'm paying yearly, as it's not paid until it leaves the bank. Am I wrong? 



-- Edited by MichaelWGroves on Tuesday 22nd of January 2019 06:45:41 PM


 Yes, and with that I'm out.



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Leger wrote:
Leger wrote:

Hi Michael

According to your accounts (based on the information you have provided us with) you have debited 5 or 6 payments to loan interest paid.  Effectively that marks them as the dates you paid the interest.  If you only want to do one CT61 a year then only apply the interest once a year.

 


 If that is the case, I can post yearly. But to be sure I'm cr Accruals dr Interest paid monthly.

Year end dr Accruals and cr bank.

So surly I'm paying yearly, as it's not paid until it leaves the bank. Am I wrong? 



-- Edited by MichaelWGroves on Tuesday 22nd of January 2019 06:45:41 PM


 Yes, and with that I'm out.


Ok, I think thats enough now. it was interesting to read, in a morbid curiousity sort of way, whilst it lasted but the professionals seem to be getting tired and frustrated now and while I could see the benefit of them having a bit of light relief from their daily frustrations of this business I think time now to knock this one on the head.

People such as John, Joanne, Casu and Nicola are not here to give free assistance to people who choose not to employ professional representation in the mistaken belief that they do not need it.

There was the potential for an interesting discussion to have developed here amongst people who understand the implications of what is being discussed. Only a business owner however would have assumed that it was anything to do with Sage. It's the old issue that if you want to get to where you want to be, you don't want to be starting from where you are.

Please now all make whatever final comments that you may have and 24 hours from now this thread will be closed unless the professionals give good reason why it should not be.

Shaun.



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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.

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