Your Fired! -Although Technically You Were Never Hired!

I have been recruiting and I thought I'd share my experiences, regarding the applications I received.

1. Spelling
If you are going to bother to apply, get your spelling right. With spellchecker these days there is no excuse. Even worse is when my name is spelt wrong! I would'nt mind but it was on the advert and on the website.

2. Attachments
I had been accepting CVs by email.  I've had quite a few where applicants have not actually attached their CVs, even though they say they have. Check and make sure before you send it. It looks really sloppy and most dont even realise they haven't attached it.

3. Company research
A real bugbear for me. Ive had a couple of promising candidates who knew nothing about the company. All it takes is 5-10 minutes on Google so there really is no excuse. If you have'nt got time or nous to do that or cant be bothered then why should I make time for you.

4. Relevance
I received alot of CVs which dont seem to understand what they are applying for. Either they are not qualified or over qualified. It may be that emailing a CV means you can fire them out quickly at no cost, and little thought. Ask yourself would you hire yourself for this role?

5. CV Layout
Set your CV out in a logical manner and simple and clear layout. I spend about 1 minute scanning the CV so I need to see quickly if its worth considering. Your CV needs to tell a story-if you have gaps-then explain your gaps in your covering letter. If you dont explain them then I'll make assumptions which may not be correct.

6. Achievements
If you are going to put these on the CV then make sure they mean something, alot of the achievements I've seen are frankly a load of waffle. Achievements should be specific, what objective was achieved, and it should be measureable.
For example - "I reduced debtors from £100k to £50k within 6 months". Not I "produce accurate accounts" - thats not an achievement-thats your job!

7. Dress
For heavens sake dress appropriately. Open neck shirts and denim jackets are not acceptable. A smart appearance looks like you've made the effort, and you want to impress.

Some of my favourites were
"I worked for William Hill Bookkeepers" - I assume she meant bookmakers!
"I didnt have time to research the company" - This from a candidate who had been out of work for 18 months!
Under Hobbies - "Cleaning" !!!

Directors’ Loan Accounts Explained

March is a popular year end for small companies to opt for because it falls in line with the tax year. Therefore, this time of the year sees directors and shareholders undertaking a pre-year end review and high on the agenda, is often how to deal with the dreaded overdrawn director’s loan account.

Taking money from the business for personal use when trading as a sole trade or partnership is fairly painless and unless proprietors’ drawings are a major drain on the business’ assets, there are generally no tax implications.

A company on the other hand is a separate legal entity, and therefore, making withdrawals from a personal company requires far more consideration.

In this article, we take a closer look at the consequences on overdrawn director’s loan accounts and how their impact can be reduced, or even avoided.

An overdrawn Director’s Loan Account

If a payment is made to a director and it does not form part of the director’s remuneration package or is not an allowable expense for the company, the payment must be set against their director’s loan account. If the director has a balance available on their director’s loan account, then the director can merrily set such a payment against their loan account with no tax implications.

However, once the available funds are exhausted, the director is in default and therefore a debtor of the company. This can have two implications:


Corporation tax charge - S455

Firstly, if a balance remains outstanding on their loan account at the company’s year end, this can lead to a tax charge on the company called S455. This only applies to ‘close companies’ though- generally speaking a company with less than five shareholders/ directors. The loan account balance must be shown on supplementary pages of the company’s corporation tax and the S455 charge is calculated as 25% of whatever balance was outstanding on the director’s loan account at the period end. The S455 tax is payable nine months and one day from the end of the relevant accounting period.

An overdrawn director’s loan account is effectively an interest-free loan, so S455 is supposed to deter the company from providing such generous perks to its directors. However, S455 is rather unusual in so much as it is temporary- it is repaid back to the company by HMRC, as the loan is repaid by the director to the company. Where the loan is repaid within nine months of the end of the accounting period though, relief is due immediately, i.e. the S455 is never physically paid (although disclosure is still required in the company’s tax return).

Provided the director repays the loan within nine months of the end of the accounting period, say by the company electing a dividend, S455 may never actually need to be paid.


Benefit in Kind

The second implication of an overdrawn director’s loan account is that it can trigger a benefit in kind. As mentioned above, an overdrawn director’s loan account is effectively an interest-free loan. The benefit would be equal to the interest (the calculation of which is stipulated by HMRC). There are a few exceptions though, which can mean no benefit arises:

• the loan is used for certain ‘qualifying’ purposes by the director, such as buying an interest in a partnership
• the company chose to charge the director interest, but the tests for this are fairly stringent
• the loan is deemed ‘small’, i.e. it is under £5,000 throughout the year
  

The interaction between S455 and the benefits code

The interaction between S455 and the benefits code can lead to some unexpected consequences:

• A S455 charge may be mitigated by an election of a dividend after the year end. However, if the balance on the loan was over £5,000 at some point, then a benefit in kind would arise.
• A loan remains under £5,000 throughout the year but does not get repaid by the year end or within the nine months following. This would result in a S455 charge payable but no benefit in kind arising.

So as you can see, an overdrawn director’s loan account could result in a S455 charge or a benefit- or both.

Record Keeping and Disclosure

Good record keeping with regards to a director’s loan account is essential. Poor records could result in the misallocation of expenses/ payments and ultimately, the right taxes not being paid.

Good records are also important, because disclosure of the balance on each overdrawn director’s loan account must be made in the company’s accounts, and the largest balance during the year must also be stated. This would ensure that a loan account that starts and ends below £5,000 is highlighted and also shows lenders and other interested parties how responsible directors are being.

Overall, the key is to keep timely, accurate records and to keep the transactions relating to each of the directors separate.

So what’s the best solution for dealing with an overdrawn director’s loan account?

As with a lot of scenarios, it’s hard to give one solution that will suit everyone’s circumstances. But as a general rule, the triggering of a benefit in kind and S455 charge can be fairly painless provided the director is intending to repay the loan fairly quickly.

However, if the overdraft may exist for some time, it may be preferable for the company to declare dividends (profits permitting). Although there may be personal tax implications for the directors, it is likely to be the quickest way for the overdraft to be cleared. Furthermore, dividends do not attract National Insurance, so it is also likely to be the cheapest option too.