Can I extend the year end to draw dividends in the next tax year?

Can I extend the year end to draw dividends in...

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The company's normal year end is 31 March2016. The company is ceasing to trade and the last sales invoice was issued in January 2016, with a few expenses going into February. They have made a profit in the last year and if drawn as a dividend will take the directors slightly into higher rate tax (approx. £1,000 each in tax). Can they extend the year end by a month and pay some of the dividends in the next tax year where they are likely to not be paying over basic rate and have no dividends at all?

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By Matrix
29th Jan 2016 22:02

The year end of the company has no impact on the tax year in which the dividends are taxed.

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Replying to stepurhan:
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By petercooperuk
30th Jan 2016 10:04

Really? If the company's year end were extended a month and the dividends declared on April 10, 2016 - wouldn't they then be taxed for the individual in the 2016-2017 tax year? (As opposed to 2015-2016 if declared on March 31, 2016.)

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By Emma31042
29th Jan 2016 22:09

But if they are ceasing I don't want to do two sets of accounts. I wanted to just extend this year end and then that be it. Or can I just drawn the dividends in the next tax year after the company has ceased and then this just affect their personal tax and not the company's accounts? Can dividend voucher be completed after a company has ceased?

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paddle steamer
By DJKL
29th Jan 2016 22:17

There is probably the option to take the funds on wind up next year and depending on quantum of dividends escape income tax on the dividends if 2016/2017 dividends would be over the £5,000 each shareholder threshold.

Also would not then be income for say tax credits. What reserves will be undistributed at cessation of trade in 2015/2016, is it less than £25,000?

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By Emma31042
29th Jan 2016 22:34

Each director has £25,700

Each director has £25,700 appox. With gross sal and divi of £17,447 taken already. If they take the £25,700 as a dividend and gross it up to £28,555 at a rough estimate they will be in higher rate by £3.5k. It not a lot of tax but would like to avoid.

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paddle steamer
By DJKL
29th Jan 2016 23:02

Care and timing and risk

Given numbers I would read following link to an earlier thread re dividends before striking off process starts in order to reduce assets< £25,000, and then relying on capital treatment on the balance,

It may in the circumstances, and as it appears they will not each go over £5,000 dividends  in 2016/2017, be safer to go the purely dividend route, so much this year using basic rate band and so much post cessation but prior to wind up in 2016/2017.

I presume in your calculations you have allowed for corporation tax due re the period to cessation?

In particular Steve Kesby's post in the thread should be read carefully.

https://www.accountingweb.co.uk/anyanswers/question/closing-company-2500...

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By Emma31042
30th Jan 2016 00:04

That was very helpful thankyou.

I've adjusted for corporation tax.

We certainly need to tread carefully. I suppose I could vote the dividend now just before the last invoice goes out to transfer most of the profit to the directors loan account as they don't have the cash available to draw it. They've certainly made enough in the last few months to justify this. and then the remainder would be capital and be taxed under capital gains tax I presume. Or if not the remainder would just go as a divided in next years tax cal as long as it was under £5k each. I'm just concerned that I really need to make a decision now and vote a dividend now before they cease trading.

Thank you for all your help.

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