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How to change Dividends into Salary After Year End


I am returning to practice after 10 years abroad.

I have just taken on a new client, who has not drawn proper dividends and has an overdrawn balance sheet at the end of the accounting period.  How would I change this into salary i.e. do I need to change last years P35 or can I put the salary through on the P35 coming up and then enter this onto the set of accounts. Or would it be better to leave the balance sheet over drawn and just pay the 25% tax on the overdrawn balance sheet.

Thank you


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26th Sep 2011 12:13

You can't change history

If the payments have been recorded as something other than salary then you can't go back and say they were salary. It's as simple as that.

Depending on the paperwork in place you either have illegal dividends that are potentially repayable or an overdrawn director's loan account. If it's the former, they are potentially repayable. If it's the latter, then you have nine months post year-end to vote legal dividends to cover them if you want to avoid the s455 tax.

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