Hi everyone
Sorry - posting as anon to try and save my blushes - go easy on me?
Upon preparing a set of accounts I have noticed a mistake - for a previous period I have left an overdrawn balance of just below £2k on a directors account, which should have been treated as dividends. This has also been omitted from the directors SA return - is the only way to correct within the ltd co to amend the earlier years accounts or can I amend this year?
Related resources
Replies (14)
Please login or register to join the discussion.
Cheaper to accept tax on the extra £2K this year at £150 than to amend
Otherwise looks distinctly like dubious activity of accountant saying 'why did you waste your dividend allowance last year? Do not worry I will fiddle it for you'
Assuming that the s.455 tax implications and reporting had not be done, wouldn’t an amendment be required for that?
Not thought of that
I was directing at wasted dividend relief
Just do not have any company with zero directors loan
I am not comfortable with nothing to post the inappropriate company payments to
If not noticed yet, probably will not be. Only loss to HMRC is holding a tiny sum for 12 months
Agreed that there isn’t a loss particularly to HMRC - why don’t you leave a directors account with a nil balance?
Think of the Dirs loan as a reserve for errors to be able to be consumed therein
If no reserve the HMRC challenged item on Corporation tax then becomes a failure to submit P11d so even more tax, penalties and failure to file.
Even worse can happen if dividends only calculated one a year on profit. The tiniest error makes the dividend an illegal dividend
The insolvency guy then wants the illegal dividend repaid in full.
Accountants have seen it all before
DIYers only find out when it happens to them
I have seen real cases of both these issues
'' Treated as dividend''
'' also omitted from director SA Return''
No amendments are required .
The ''dividend '' never existed.
Are you going to ask director to falsify minutes ( sign off minutes prepared by you? ) and accept a false dividend certificate / voucher also prepared by you.?
BTW Are there any s.455 tax implications and reporting ?
If you are doing dividend documentation and minutes today, what date will appear on it?
With an email date stamp.
Oversights happen, with attendant consequences.
@ Anonymous (OP).
I have taken at face value your words "SHOULD HAVE (my emphasis) been treated as dividends". Could we please nonetheless establish whether I am CORRECT in taking those words at face value; since the two eminent previous posters have interpreted those words differently, and concluded (if I interpret their responses correctly) that you are seeking to re-write history (by "backdating" the award of dividends).
Determining whether my interpretation is correct, or alternatively the interpretation of Paul and Frank, is the necessary first step: if their interpretation is correct, then their responses are entirely valid but, if not so, then it is indeed necessary to correct both the Accounts and Tax Return.
AWEB contains countless threads debating what constitutes a VALID dividend, and hence there is no point in my adding to that debate, except to ask you (if my interpretation is correct) to expand upon the words "treated as dividends" (in essence WHY and HOW you believe they ARE valid dividends).
You will of course, if you are already an AWEB member, only be able to preserve your anonymity, if you respond to this post, by amending your initial question (an "EDIT" added thereto is the most suitable means of so doing).
If my interpretation is indeed correct, then could I ask whether the CT Return (if submitted) included the S.455 additional page (and whether the overdrawn DLA was shown as having been repaid subsequently).
Basil.
Consequences if the ''error'' amended
letter to client could include some of the following.... ugh*100
Dear Client
Following our meeting x months back .
I seemed to have overlooked your instructions to prepare minutes and dividend paperwork to clear your director's loan account of £2,000.
My oversight does have consequences.
I do require your formal agreement to my proposals,.
I have contemporaneous notes of the instructions which I attach herewith , see para 9 of my meeting notes.
I now attach documentation for your attention:
The dividend voucher should be retained as part of your Self Assessment record- keeping obligations
Your SATR shoud have included the dividend , above.
In your particular circumstances the unreported dividend income does not give rise to a tax liabilty .
I am of the view that there is no point amending your filed SATR, however I do require your specific instructions on this point, it is YOUR Tax return.
I also failed to reflect the dividend in the company financial statements.
Again, given the size and nature of the error there is, in my view, no need for the prior year accounts to be adjusted , the correction can pass through this years accounts.
However, as they are ' your' ( repsonsibility for preparing true and fair... ) accounts I require your formal agreement that the accounts may be left unadjusted.
I look forward to hearing from you.
Yours
tick bash and ever so humble *100
Without amending the SATR, I think you’ll be left with declaring the dividend in the later accounting year, which I am assuming means it’ll fall within a SATR which hasn’t yet been filed, so a few hundred pounds extra tax.
I wouldn’t even mention it to the client.
(I’ve made a few assumptions in terms of the type/nature of your client ...)
I take broad brush approach to tax returns.
No extra tax due, do not bother amending.
If challenged no tax no penalty: consequently no point
But the dividend should be real. I am not convinced.
I recon it is just £2,000 more taken out of company than directors loan prior balance.
Healthy skepticism a good trait in my opinion
Whose ‘error’ is it?
Did the director declare dividends, which you failed to reflect in the accounts and tax return?
Or did the director fail to declare dividends to clear his loan account? (Declaration of dividends is the responsibility of the directors, not the accountant.)