Did your Business start in this Financial Year? Will you have to pay the IRD Use of Money Interest?

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As a new Non-Individual (Company or Trust) business you could have to pay Use of Money Interest to IRD?

A new business (Company or Trust) is one of the categories of taxpayers that may be liable for interest even if they have no provisional tax liability in their first year of operation.

You may have to pay Use of Money Interest (UOMI), if the Residual Income Tax (RIT) is greater than $2,500. Note: RIT is the amount of tax you have to pay, less any tax credits you may be entitled to (excluding working for families’ tax credits or other tax payments made during the year) and any PAYE deducted.

In the first year of operation of a business there is normally no Provisional Tax Due. This is because Provisional Tax is based on the RIT (tax to pay) on the last income tax return when it is more than $2,500. Therefore because this is the first year of operation the tax liability is often overlooked and a Company or Trust ends up with UOMI to pay. Read More »

Xero End of the Year Tips

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As the calendar page has turned to show us it is March – which, by the way, happens every year – we see and feel the anxiety levels start to kick-in for business owners and their bookkeeping, accounting and tax professionals.  (Yes, even bookkeeping, accounting and tax professionals get anxiety).  Wouldn’t it be great to change this annual occurrence of anxiety with just a few simple steps? Your anxiety can be eliminated, if you choose now to implement these tips.

How different would your business be IF…. Your record keeping is current and ready to hand over to your bookkeeping, accounting or tax professional sooner rather than later. At this time of the year, when businesses are pulling their year-end info together for their annual accounts and tax preparation we offer the following Tips. Read More »

FAQ: How does a company Repay a Shareholders Advance?

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Question: From my understanding, considering the company was initially funded by owner funds of $50K put into the company, it should be possible to take owner funds out from revenue earned up to this amount. Is this correct?

Shareholder Current Account

How Funds are Credited

It is common when a company begins operation for the shareholder(s): –

  • To pay up the share capital, for the purpose of this exercise we’ll say it is $120 being for 120 Fully Paid-up $1.00 Shares, and
  • To also advance needed capital so that the company can start operating and for the purpose of this exercise we’ll say it is $50,000. This is commonly referred to as Working Capital.

Let’s look at how this is recorded in the company accounting system. It is essential that the $50,120 be deposited into the company’s bank account. The $120 is coded to the Paid up Share Capital Account and the $50,000 is coded to the Shareholder Current Account, which essentially records any loans either to or from the company. Read More »