The directors of a newly formed company entered into a contract of employment with an individual. However the company faced various start up problems and had not traded by the tax/financial year end. Naturally the employee could not be paid so the directors were willing to confirm that the company is liable for the unpaid salary and would pay the it when the company started trading. The directors agree that although the company was trading it had an employee. What are the tax implications for the company and employee? And how is the liability disclosed in the accounts (Including accompanying notes) of the company?

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Originally Posted by Kudzie

The directors of a newly formed company entered into a contract of employment with an individual. However the company faced various start up problems and had not traded by the tax/financial year end. Naturally the employee could not be paid so the directors were willing to confirm that the company is liable for the unpaid salary and would pay the it when the company started trading. The directors agree that although the company was trading it had an employee. What are the tax implications for the company and employee? And how is the liability disclosed in the accounts (Including accompanying notes) of the company?

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For the fixed liabilities;unpaid salaries and appropriate taxes; should set up a liability for these amounts with a footnote indicating contractual ogligated. In addition compute payroll taxes o be paid by the employer and create a liability for that amount.Failure to resolve amicably disparities in the payroll areas should be resolved inhouse. Once litigation is suggested expenses can be very expensive...