My client has closed her company with. 55k of dividends in final accounts last year but now wants to see is she can reduce her tax bill . Two months before it closed it has 20k, can this be classed as capital or will this trigger an enquiry. If she reinstated the company through the courts what happens to the money taken out. Does this need to go into SElf assessment or can she say earlier costs paid were actually dividends reducing the final bill to 33k. She's a young mum and in a real state about this so any advice would be good. Thank you!
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Not clear
You are not explaining the position very clearly.
Has the company already been dissolved or not?
So what's the question? Tax
So what's the question? Tax treatment of sums taken out by shareholder before dissolution? If so, how much did she take out over and above the £55k dividends you have already mentioned? Was a liquidator appointed or was it a DIY dissolution?
Can is a dangerous word
You CAN say whatever you want to. However, saying something was for "costs owed for admin wages etc" when it was nothing of the sort is extremely inadvisable for what I would hope are quite obvious reasons. I am surprised that any professional should even consider asking such a question. Can we say the final payments in the best tax year we're costs owed for admin wages etc rather than dividends so the final tax bill is £33k.
Re-instatement
If the company is reinstated what happens to the money taken a year ago?
Why would anyone want to go to the trouble of re-instating the company? Is there a problem or difficulty you have not shared?
Advice about what? Still not
Advice about what? Still not sure what you are asking for. Is there some problem or difficulty you have not shared?
Why does it matter what HMRC do or do not look at?
If you want advice on how the final distribution of the company's assets to your client should be treated for tax purposes you will have to answer the questions in my last post.
If you want advice on something else you will have to explain what it is.
You said she took £55k of
You said she took £55k of dividends in the period covered by the company's last accounts. Which period was that, and how does £55k reconcile with the figures of £17.5k and £2.5k you now mention?
Rewriting history?
@OP
Are you saying that the company had £20K cash, then made £35K in the last two months, then the owner took the entire £55K cash out of the company as dividends and then dissolved the company, but has now spent the money and cannot pay the tax on the higher rate dividends, so wants to somehow rewrite history and do some fiddling of the books to resurrect the company, pretend she received the cash over two years and thus avoid the tax bill?
Forgive me but that's what it sounds like. You seem hung up on what HMRC will check - are you acknowledging that it's probably fraudulent but asking if you think your client can get away with it? Again, apologies if that's not what you meant but that's how it is coming across.
You are probably going to have to tell the client to live with the historical facts...
James has done a valiant job of trying to read between the lines of what you have been saying, but the conclusions he has reached may or may not be what you actually mean.
If you want help you will have to explain what you want.
What accounts were prepared?
The company no longer exists so what is done is done. Just explain what happened if you want get advice.
If the company is reinstated it has no profits and no cash to distribute so that plan is obviously a non starter.
Any payments to the shareholder's partner can't have been dividends. Was anything in fact paid to him at all?
How much was paid to the shareholder over and above the dividends of £55k that you say appeared in the last accounts? Which period did those accounts cover again?
What is this money ?
I've read this whole thread twice and I've still no idea what the client has taken out. Was it declared as a dividend ? Was it shown as a salary on form P35 or RTI ? Or is it just a "piggy bank" type withdrawal because the client reckoned it was her money anyway ?
Then tough luck
This is done and dusted. If she is stuck with a high tax bill as a result now, that is the price she pays for not taking advice in advance. Directors treating companies as personal piggy banks is precisely why they should not have companies in the first place. Good point listed as div in final return but no other paper work more piggy bank if that's a term we can use!
You keep saying "this is not dodgy" but then you keep making suggestions that misrepresent historical transactions. Almost everything you suggest could have worked if put in place in advance of payment. I cannot believe you are now saying "He.s not a shareholder, but is that checked" at the same time as saying nothing dodgy is going on.
This query basically boils down to "If I lie to reduce my client's tax bill, will I get caught?". If you really think that is a suitable question for a professional to be asking, then I sincerely hope the answer is yes.
I am not prepared to waste any more time on this until you start answering the questions I ask.
If you want help explain what has happened and what help you need.
Starting to get there
What about accounts? Up to what date have the company's accounts been finalised and sent to Companies House and HMRC?
It depends
Accounts are up to date. Can I say the final £25k was capital not dividends.
It depends.
Was it dividends ? Or was it capital ?
You need to establish the facts rather than ask what you can say.
Point?
...but I would like to amend to 25 in final quarter and 30 in year before. Is that likely to be ok?
What would be the purpose of doing this? What difference does it make to anything?
Presumably part of the £55,000 was paid to the shareholder in the period up to 5 April 2013, and was included on the shareholder's 2012/2013 tax return. How much was that?
Rewriting history
Accounts finalized to May 31st company year end these stated divs as 55k but I would like to amend to 25 in final quarter and 30 in year before. Is that likely to be ok?
No it wouldn't.
Why are you asking if it's OK to tell lies ?
Nobody's going to be daft enough to publicly say it is.
Dividends are dividends.
Accounts finalized to May 31st company year end these stated divs as 55k but I would like to amend to 25 in final quarter and 30 in year before. Is that likely to be ok?
No it's not.
1) Firstly they were in the accounts as dividends, and those accounts should have been finalised and signed by the director(s).
2) When they were paid, they should have been agreed at a board meeting, with minutes and documentation showing them to be dividends.
So can you go back and say...hmmm maybe this was a capital distribution. Answer No.
If you're an accountant for these people you really should have been aware of this, and made the client aware of this.It's as simple as that.
Afraid so
If you've already said some money is dividend or salary, then that's what it is.
@joanne
I must say I have sympathy with your client. It appears to me that you don’t have the skills or experience to resolve these issues.
I agree with other posters that you seem to be proposing actions that are at best unethical. Your client has the excuse of not knowing or understanding what she should have done, but you are a professional advisor (at least I assume that’s how you see yourself).
You have has some of the most knowledgeable contributors trying to help you despite you providing scant and contradictory information. If they give up on you then they are not to blame.
I have not quite given up yet, but will do very soon if you continue to refuse to answer the simple questions I have asked.
So final accounts to 31 May 2013 showed dividends paid during that year of £55,000? Please confirm.
They were final accounts in every sense and were submitted to Companies House and HMRC. Please confirm.
In addition to the dividends did those accounts include any loan to or from the shareholder, and if so how much?
Thank you. Now we are making
Thank you. Now we are making progress. Next two questions:
When did the company cease trading? Had it already ceased before 31 May 2013, or did it continue to a later date?What were the net assets in the balance sheet at 31 May 2013?
But until you answer my questions we don't know what the tax treatment of the final distribution is. Have you decided you no longer need help?