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