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Are Net Dividends declared in Self Assessments?

Dividends in from one Company but money invested personally in to another.

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Hi there

Appreciate some help on this one please.

I have a client that is the Sole Director of two Ltd Companies.

Will have taken £20K in Dividends from Company 1 and invested £30K in to Company 2 during the HMRC fiscal year for 19/20.

The Company's trades are unrelated (if that could be an issue?).

Does the client pay Dividend tax on on the £20K from Company 1 and the £30K sit as a negative to be used in future years re Company 2OR are the amounts netted off and therefore £0 tax is due as she has invested a net of £10K?

Many thanks

Justin

 

Replies (24)

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RLI
By lionofludesch
22nd Jun 2020 14:32

There's no such thing as a negative dividend.

Your client appears to have lent some money to the second company. Or perhaps bought some shares. Either way, neither is tax allowable.

Do yourself a favour and step away from the Tax Return before you do some real damage. Pass the client to an accountant with some tax experience.

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Replying to lionofludesch:
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By juzza07
22nd Jun 2020 14:49

P.s I run a Sole Director Company that specialises in Limited Company Accounts.
Not being sure about an aspect of a Self Assessment does not mean I need to 'step away from the tax return'.
It means I was not 100% sure about an aspect and instead of guessing (would have been correct, fyi) I wanted to check.
I guess you never have a query and were born with your knowledge..

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Replying to juzza07:
RLI
By lionofludesch
22nd Jun 2020 14:56

juzza07 wrote:

P.s I run a Sole Director Company that specialises in Limited Company Accounts.
Not being sure about an aspect of a Self Assessment does not mean I need to 'step away from the tax return'.
It means I was not 100% sure about an aspect and instead of guessing (would have been correct, fyi) I wanted to check.
I guess you never have a query and were born with your knowledge..

I had a query last week and it was dealt with very satisfactorily on this very forum.

I've worked on my own for thirty years. I take the trouble to keep myself up to date and I don't take on work that I'm not entirely comfortable with. The secret is to know your limits. It's not hard.

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Replying to juzza07:
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By Tax Dragon
22nd Jun 2020 14:58

Forget the tax return issue for a moment - as I appreciate you specialise in companies (and there is a big difference from personal tax): how are you showing the £30k in company 2?

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By Anonymous.
22nd Jun 2020 14:32

Are you confusing your client's situation with investment in Enterprise Investment Schemes?

https://www.gov.uk/guidance/venture-capital-schemes-apply-for-the-enterp...

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By Tax Dragon
22nd Jun 2020 14:33

@John Stokdyk… I'm interested as to how we 'should' reply to this one.

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Replying to Tax Dragon:
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By juzza07
22nd Jun 2020 14:37

Politely?
I work on my own and have not come across this issue before.
Appreciate genuine, polite, responses.
Thanks.

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By johngroganjga
22nd Jun 2020 14:35

There is no connection between the two events. Your client will pay income tax on £20,000 of dividend income.

Obviously it would have been better for the company that has paid the dividend to have lent £20,000 to the other company instead. That way it would not have been income for you client.

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Replying to johngroganjga:
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By juzza07
22nd Jun 2020 14:39

I thought so, but was not 100% sure.
Thank you very much for your help and for being so polite - much appreciated.

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By SteveHa
22nd Jun 2020 14:46

I don't usually play these games, and I appreciate that you may feel put out by some of the replies, but Lion and TD both have valid points. This is a "tax 101" type question, that you should be able to answer before advising clients on it.

If you work alone and for yourself, and I appreciate that you may do little tax work, you may want to consider engaging a freelancer for tax work (or at least advice) that you aren't sure about.

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Replying to SteveHa:
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By juzza07
22nd Jun 2020 14:53

Fair enough; I have built a successful business on my own over 10 years after some MH issues and now and again I just come on here to clarify some (what seem obvious now) points.

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Replying to juzza07:
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By Tax Dragon
22nd Jun 2020 15:43

SteLacca's advice is sound.

Leave this thread where it is but do look into cross-referrals with a tax bod. They can be mutually beneficial.

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Replying to Tax Dragon:
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By juzza07
22nd Jun 2020 15:44

Yes, and appreciate your advice.

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By Ben McLintock
22nd Jun 2020 14:54

How on earth can you specialise in Limited Company accounts if you don't appear to have a basic working knowledge of how income extracted from a Limited Company is taxed?

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Replying to Ben McLintock:
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By juzza07
22nd Jun 2020 14:58

Hello, nice to hear from you.
BS, P&L & TB etc.
I do actually know much about SAs and Ltd Accounts but had one query as was not 100% on an item I had not come across in a few years.
But thanks for your concern.

Thanks (0)
By mrme89
22nd Jun 2020 15:25

Dear Members,

I’m a specialist in car mechanics but have basic question that you might be able to help with. What’s an engine?

Thanks (4)
My photo
By Matrix
22nd Jun 2020 15:36

The best way is to separate it out.

Dividends received - you know how they are taxed

Investment - Director loan I assume - you know how this is booked in a company and you also know that there is no income tax relief for this.

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Replying to Matrix:
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By juzza07
22nd Jun 2020 15:39

Thanks, appreciate your response.

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By K81
22nd Jun 2020 15:56

you are getting grief from some as its a daft question - or tax 101 as SteLacca said.

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By jonharris999
22nd Jun 2020 16:18

As I was saying...

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Replying to jonharris999:
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By Tax Dragon
22nd Jun 2020 17:00

I doubt the OP has seen your thread.

OP, a) well done for cancelling the report; b) you might find Jon's thread https://www.accountingweb.co.uk/any-answers/could-we-cultivate-a-kinder-... an interesting read/place to comment.

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By mrme89
22nd Jun 2020 16:45

You’ve got a year end of 19th March. Interesting.

I’d have changed the ARD to make life easier.

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Replying to mrme89:
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By juzza07
22nd Jun 2020 16:53

19th Mar works fine for me.

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Maddy Christopher
By Maddy Christopher
22nd Jun 2020 17:04

Any Answers is a professional forum. We expect members to behave appropriately and sensitively at all times and never to post comments which are knowingly offensive. We have decided to close the thread.

If we see members continue to provoke other members we will escalate matters.

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