Dividend in wrong year

Self Assessment - posted dividend in prior return

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I have realised since taking on a client that I denoted dividend income in his 16/17 return for a dividend declared May 17, hence I understand this really should be a 17/18 item. His co has a 30 April year end hence my silly error. As a consequence the dividend was declared early in his SA.

From a perspective of correctly paid taxes, as the allowance kicks in 6 Apr 18 then I assume there is no difference with respect of this timing discrepancy.

My question is how to best correct this. My thought is that going forward, it makes sense to shorten the next period and align to the tax year. Then if a dividend is declared May this year, it's a 18/19 income item?

Replies (14)

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ALISK
By atleastisoundknowledgable...
12th May 2018 12:25

Sorry, I don’t see how changing the co YE will affect the dividend allocation.

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Replying to atleastisoundknowledgable...:
Mayflower Accountancy
By JColvin
12th May 2018 12:50

My question was probably not phrased correctly; thus you're right it won't.

My thinking was going forward to shorten the period to get a neat, aligned company year-end with the tax year-end to stop the issue next time.

I since have actually made the adjustment so feel satisfied with the situation now, many thanks.

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By johngroganjga
12th May 2018 13:22

The way to stop the issue arising next time is to pay greater attention to detail. Changing the year end to avoid having to do so is like using a sledgehammer to crack a nut, and I am at a loss to understand how you would explain the reason for changing the year end to the client.

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Replying to johngroganjga:
Mayflower Accountancy
By JColvin
12th May 2018 13:44

So you are saying that having a company year ended March does not make any sense? That it would not simplify the calculation of tax returns resulting? That there is no reason a majority of other companies I have observed adopt, or aim to adopt this year-end

Sledgehammer to crack a nut in isolation, but a naive response. Sadly typical of the condescending tone to genuine requests to help I find on this forum

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Replying to JColvin:
RLI
By lionofludesch
12th May 2018 13:51

Personally I like the idea that I can arrange a dividend for a particular set of company accounts to fall in one of two income tax years. It gives me planning opportunities.

But - hey - if you can't cope with dates and things and the important thing for you is to make your life easy, go for a 5th April year end.

However, I don't believe that John is the naive one here.

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Replying to lionofludesch:
Mayflower Accountancy
By JColvin
12th May 2018 14:12

Conceptually, that is a very helpful suggestion and a good way of looking at it going forward - thank you.

It certainly isn't a case of not being able to "cope" - I made a mistake (don't we all?) but I had not seen other advantages to having company accounts straddle two tax years.

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Replying to JColvin:
RLI
By lionofludesch
12th May 2018 14:15

Of course we all make mistakes.

It doesn't mean that we need to take such drastic action to prevent them in the future.

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By Matrix
12th May 2018 19:35

If there is a 31 March year end and the company typically declares one large dividend when the accounts are prepared then I don't see how this resolves the issue. Alternatively, if the company declares a dividend now and then changes the year end to 31 March and then calculates the distributable profits and dividend before year end next year (which I presume is the reason for the change), then you would end up with two large dividends in the same tax year.

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By Tax Dragon
14th May 2018 00:00

Isn't this an S.A. question? 2016/17 tax return is incorrect, so amend it. Why was that question even asked? What am I missing?

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Replying to Tax Dragon:
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By chicken farmer
14th May 2018 08:34

I don't think you are missing anything, Dragon. The questioner seems to think that the dividend to go in the SA return is somehow related to the company's year end or the date the dividend is declared. As we all know it is the date the dividend is paid that determines the tax year (e.g. by being credited to an account on which the shareholder is free to draw).

As mentioned previously, it would be interesting to hear how the questioner explains to the client why the year end needs to be changed - its totally unnecessary.

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Replying to Tax Dragon:
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By andy.partridge
14th May 2018 09:51

Yup!

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By ireallyshouldknowthisbut
14th May 2018 17:24

I love posts like this, I feel less carp at my job knowing there are other much more useless at this being an accountant lark than I am.

Thanking you OP!

Thanks (1)
Replying to ireallyshouldknowthisbut:
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By Justin Bryant
14th May 2018 18:02

Yes indeed. Only interim dividends are taxed on a receipts basis. For final divs it's when they are declared usually. But then hardly anyone does divs properly as has been stated here numerous times.

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Replying to Justin Bryant:
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By chicken farmer
15th May 2018 09:34

Just to clarify the point on final dividends. These are taxed on a receipts basis (s. 384(1) ITTOIA). In the case of small companies it may well be that this is the same day as the declaration of the dividend but that is not necessarily always the case. If the resolution specifies payment at a future date (as in the case of quoted companies), it is that payment date which determines the tax year in which the dividend is taxable.

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