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By CA-London
09th Dec 2014 15:56

summary please :)

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By User deleted
09th Dec 2014 16:22

Summary

HMRC lost (strictly, because it was a taxpayer appeal, the taxpayer won)

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Portia profile image
By Portia Nina Levin
24th Apr 2015 15:03

(No subject)

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Replying to DJKL:
RLI
By lionofludesch
10th Dec 2014 18:36

Agree with Portia

Portia Nina Levin wrote:

A dividend is a dividend is a dividend, unless it is not, which does not necessarily mean that it is salary (which HMRC might suggest), even if you have said so, to try and avoid having to pay it back to the liquidator.

Totally agree with this - an illegal dividend is still a dividend.  Lack of profits doesn't turn it into salary.

Provided the proper formalities have been completed - dividend declared, paid in proportion to the shareholdings, etc etc.

The only downside is that the shareholders may be called upon to send the money back.

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By andy.partridge
09th Dec 2014 17:01

Life is too short

I admit I didn't read it in full, but am I right in thinking that the Court found that the clearing of an overdrawn director's account wasn't to be treated as salary because it was only retrospectively thought correct to treat the payments as such?

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By Portia Nina Levin
24th Apr 2015 15:03

(No subject)

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By andy.partridge
09th Dec 2014 17:45

But

At the time, did the directors have reason to believe there were sufficient reserves?

I note a reference to Sage. Was the software, in part, to blame? Only kidding legal eagles.

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By Portia Nina Levin
24th Apr 2015 15:04

(No subject)

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By User deleted
09th Dec 2014 17:53

One takeaway for me from this case is that HMRC are capable of sending people like Mr Boyle to argue before the tribunal that an interim dividend, until it is a final dividend, is treated as a loan in the hands of a director (what a joke!). He provided no authority for that proposition and we do not think it is correct.

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By King_Maker
09th Dec 2014 18:27

@ Portia  -  thanks.

@ Portia  -  thanks. Interesting case (plus Williams v. HMRC which was cited).

@ taxguru - my thoughts exactly!

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By LuKosro
10th Dec 2014 17:56

Hi

First of all, thank you Portia for this "gem". I still do not understand why the accountants would want to "re-classify" the dividends as salaries? Were the dividends illegal or not? From paragraph 13 and 20, I understand that there is no evidence to suggest that the dividends were illegal when they were declared. 

It seems that the theme throughout the case is that the numbers were consistently wrong over the entire period of time and the accountant made constant "adjustments" which never really reconciled. If the accountants made this kind of mistake, I suppose they were sent to court by their former clients. 

PS. Andy: "Guns don`t kill people, people kill people" :)

PS2. Would it be too much to ask for a weekly "tax case" from you, Portia? Please? 

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By Justin Bryant
10th Dec 2014 19:14

Mirror image case
Is in the link below (see especially para 47):
http://www.bailii.org/uk/cases/UKFTT/TC/2014/TC03874.html

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By User deleted
10th Dec 2014 21:04

Pedancy

An illegal dividend must, by definition, still be a dividend. If it wasn't a dividend it couldn't be an illegal dividend.

But the Companies Act does not refer to 'dividend' - it refers instead to distributions, of any kind. ITTOIA 2005 s383 refers to "dividends and other distributions", implying that a dividend is just one type of distribution. So, an unlawful distribution is an unlawful distribution - but it isn't necessarily a dividend, illegal or otherwise. But it could be. Or it could be something else.

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By thomas34
11th Dec 2014 09:26

Long Read

It's a long read but the FTT arrived at the right conclusion. As PNL has said, a dividend is a dividend is a dividend irrespective of what HMRC think. It almost infers that reclassification can never happen retrospectively - it depends upon what the intention was when the money was drawn.

It doesn't stop the dividend being illegal if sufficient reserves aren't available but that's another question. I hope HMRC don't waste everybody's time and money by appealing.

I must say that the accountant seems to have done his best to foul up the whole situation by reclassifying the money extraction as salaries - what was he thinking?

 

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