Accountant question about shareholder's salary

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Forums › Finance and wealth management › Accountant question about shareholder's salary - Can someone please help?

turtleattacks

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#280829 13-Jan-2021 11:16

Hi guys,

Background

My wife owns a limited company (on AIM) in which I'm a shareholder and will be receiving a shareholder's salary.

Now, I also have a PAYE job but also have a side hustle in which I operate as a sole trader. I do my own accounts/GST from the sole trader business as it's not a big operation. Literally takes me under an hour.

When I was made a shareholder, I was asked to sign over for the accountant to be an agent.

Question

The accountant is now saying that they must do my side hustle business accounts as they are now acting as an agent for ($500+GST), this is because everything is 'out of sync' now as they won't know how much shareholder's salary to distribute until they know profits, and obviously without knowing the extra salaries, I can't do my own tax returns.

Secondly there's some sort of sync issue as one tax system is in AIM and one is done annually.

Is our accountant just having a go to try to charge more?

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mrdrifter

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#2634768 13-Jan-2021 11:25

Sounds sensible to me (the approach, not necessarily the cost), otherwise how would they know that they are getting things correct and otherwise leaving you with a shortfall or over payment trying to account for all your different income streams.

BlinkyBill

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#2634773 13-Jan-2021 11:33

I’m assuming you mean ‘tax agent’. I’m 90% sure your new tax agent needs to do all of the tax for all of your personal income streams. And the AIM methodology is, well it’s not complicated but it’s not easy-as either. It would better I think for the tax agent to do it, given you are not straightforward.

Their fee’s are deductible.

An actual tax agent can confirm - but why not just ask your current agent why and for clarification?

nutbugs

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#2634817 13-Jan-2021 13:00

They don't "have" to do everything, however you will not get the best service and value if they don't as it will be difficult to optimise distributions for the best tax value.

Dynamic

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#2634906 13-Jan-2021 16:26

Shareholders salaries are for shareholders working in the business. Will you be working in the business and receiving fair market remuneration for your work? If not, you should not be receiving a salary and should instead be receiving a year end dividend.

Tax for a person is worked out across all of their income streams. I expect it would be challenging but not impossible for an accountant to do only part of your tax work. IMHO, you should have them do the lot.

Source: I have done some accounting papers and have run multiple small businesses.

“Don't believe anything you read on the net. Except this. Well, including this, I suppose.” Douglas Adams

turtleattacks

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#2634908 13-Jan-2021 16:30

I think I’ve put in my fair amount of work in terms of setting up the website and managing the domain.

Think I would’ve be able to earn more if I had charged my hourly rate to one if my clients. :)

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Batman

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#2634924 13-Jan-2021 17:25

If you are doing work and is happy to carry liability, become a director. That's all.
Ps yes 500 bucks is worth it

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JarrodM

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#2634942 13-Jan-2021 18:17

There is no reason you can’t continue to do your own accounts for the side hustle and then advise the accountant of your income/loss, which will then help from a tax planning perspective in regards to the shareholder salary.

Depending on the size of the side hustle, $500 plus gst is very reasonable. I’d go ahead with at least making the accountant your tax agent as you’ll come under their extension of time and have until 31 March to file, instead of 7 July. So you would still be in sync, and your return will be filed on time.

The process would be, you do side hustle accounts, notify accountant of the income/loss. They will then make salary decision, and notify the salary you’ll be given which you can then put into your tax return.

Am a CA in a public practice firm, sing out if you have any other questions.