Has anyone had a HMRC query on dividends?

Year end of company straddles 5th April

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We've had a query from HMRC saying that they don't think the dividends shown on the tax returns for the last 5 years agree to those in the accounts.

Has anyone had this type of letter?

Replies (11)

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By SteveHa
17th May 2017 10:02

Nope.

Have you checked, and are HMRC correct?

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paddle steamer
By DJKL
17th May 2017 10:13

Yes, but it was very particular to preference dividends that required to be accrued but had not been declared or paid.

We were very careful to accrue the dividends each year into a provision and had a note within the accounts explaining the provision ; they were not credited to DLA.

One of the consequences of FRS25.

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By johngroganjga
17th May 2017 10:14

Not had such a letter personally at any time recently, but it is a common question, because after all it can be difficult to reconcile the figures from the tax returns and the accounts alone, can't it?

So, as SteLacca says, the question is do they reconcile or not? If so, provide the reconciliation. If not, own up and repair the tax returns.

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By SJRUK
17th May 2017 10:43

I did once. All was in order and they accepted my explanations.

It came about because my client withdrew about £30k from the business account in order to repay a directors loan account and they queried this as to whether this was actaully a dividend that should have gone on her tax return. I think it might have come about via the bank reporting the withdrawal to them?

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By jon_griffey
17th May 2017 10:56

I have never known HMRC to query the dividend figure on the tax return and have often wondered why they don't tighten up on this. With RTI, if the P60 information does not tie up, you soon get an enquiry but there is no effective mechanism for checking dividends. Having taken a few clients from other firms and found that the dividends on the accounts bear no relation what, if anything has been reported on the tax returns I expect that non compliance is rife. This is one area where MTD could massively improve the tax gap.

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FD4Cast
By James Power
17th May 2017 13:05

All the more reason to get the correct Dividend Paperwork in place:-

https://www.accountingweb.co.uk/tax/personal-tax/dividend-paperwork-pain...

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By vinylnobbynobbs
17th May 2017 13:41

I had a phone call from the "High Net Worth" unit about a client's tax return and was asked if we had omitted any dividends from the return as they did not match the company's. I was nonplussed as this sort of question should have been raised through an enquiry and |I told HMRC this. The deadline for opening an enquiry is now long gone and I am still awaiting HMRC's opening letter.

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By ireallyshouldknowthisbut
17th May 2017 15:44

Similar to Jon, I am pleased to see HMRC are actually looking at this.

I have never had someone try and cross reference with our clients, and whilst they would add up (one hopes!) its never going to be a smooth reconciliation.

Moreover as dividend are no longer reported to HMRC as part of the company accounts (ie we can submit filleted now to HMRC) their ability to do this in the future seems to be further reduced, albeit you could compute with the profit declared for tax and reserve movements.

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Replying to ireallyshouldknowthisbut:
By Tim Vane
17th May 2017 19:50

ireallyshouldknowthisbut wrote:

we can submit filleted now to HMRC

I did not know that. So HMRC no longer require a P&L? Seems fairly pointless to submit accounts at all...! Certainly makes a nonsense of HMRC's hugely expensive Connect system.

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Replying to Tim Vane:
By johngroganjga
17th May 2017 20:04

I agree. It can't possibly be right that companies no longer have file their full accounts with HMRC.

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Replying to Tim Vane:
By jon_griffey
18th May 2017 09:38

Tim Vane wrote:

ireallyshouldknowthisbut wrote:
we can submit filleted now to HMRC

I did not know that. So HMRC no longer require a P&L? Seems fairly pointless to submit accounts at all...! Certainly makes a nonsense of HMRC's hugely expensive Connect system.

I didn't know that we could file filleted accounts - but even FRS102 1A accounts do not require dividends to be disclosed. This and FRS105 accounts makes iXBRL largely pointless as well.

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