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Ex spouse "stole" dividends

Advice on where to point new client

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Oh wise ones in my computer box I have had a new client come to me with a tale of woe.

In 2019/20 she split from her husband, she was employed by and also a shareholder at the time of a company of which husband was a director and shareholder, it comes to preparing her 2019/20 return and her ex agent includes dividends and salary on her return which she later realises she does not recognise. She has asked me to query this with the now ex employer and on receiving a ledger printout of her dividends and salary payments from her I noted that the final dividend and several salary payments have been made into a bank account which is not her personal one (and the dividend was noted on the ledger printout as being in her ex husband's name).

On asking for clarification the ex-employer has stated that the ledger printouts are correct and show payments to my client and are not in relation to the ex but are unwilling to furnish any information about who authorised the change in banking details etc or engage any further.

My client "thinks" that these payments were made into a joint bank account but that she never had access to it.

My feeling is that the ex-husband made the changes to banking details and issued himself a dividend in her name leaving her with the tax liability, but other than making a SARS report is there anywhere forward my client can go or is she stiffed out of this money -  which is a significant amount to her. She would also like to go back and change her 2019/20 tax return to take these transactions out however as they were made to a joint account, even though she had no access, I'm sure that HMRC wouldn't accept that argument and have declined to do this on the information I have.

Suggestions, ideas and thoughts on any new swear words for the idiot who has been stupid enough to look into this in mid January gratefully accepted.

 

 

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paddle steamer
By DJKL
18th Jan 2022 17:27

She ought to approach her solicitor who can maybe suggest these sums get incorporated into any negotiated divorce settlement between the parties.

Meantime presume she still has her shareholding in the company and her husband will likely want same.

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Replying to DJKL:
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By Catherine Newman
18th Jan 2022 17:59

I am a female director going through the same thing. I notified my ex he was no longer a shareholder in March 2021, filed at Companies House. He nicked half the money from our joint account so the only asset in contention is the house.

This is all due to my children bleating to Child Line.

Everybody will now be paying more NI as a result of the carnage of Childrens Services visiting me for 6 months. Why am I paying child maintenance when Ms Newman can barely provide for her children?

The case is now at the Home Office.

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Replying to Catherine Newman:
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By I'msorryIhaven'taclue
18th Jan 2022 21:35

Catherine Newman wrote:

Why am I paying child maintenance when Ms Newman can barely provide for her children?

I'm so sorry to hear all that, C.

Time was when yours truly had a run of clients with marriage break-ups, twenty years or more ago during a time in which the CSA were something more of a force to be reckoned with. For the most part I was chosen to bat for the paternal side, often mandated with supporting hard working and too busy and tired business-owner Dad and cushioning him from his prospective bedsit existence and unpromising horizons; while meanwhile his oft errant wife would seek to draw heavily upon his substantial earnings so as to keep their kids in the manner in which they were accustomed (and her new beau in the manner in which he would fast become accustomed).

To my lasting chagrin I once undertook to act for my brother under such circumstances, and was duly able to reduce his monthly maintenance payments to the statutory minimum of the time (£10, I seem to recall; although it was early 2000s which today feels like light years away). The thinking was that rather than have the CSA take away the bulk of his income, they would nevertheless provide financial support for his young children; and, in pursuance of that particular wheeze, he duly gave up his £70k a year Sch E job (a veritable fortune circa 2001) and instead entered into a not dissimilar self-employment of (indeterminate, and difficult to ascertain) profits. Ducking and diving? Perhaps, but all within the rule boundaries of the time, needless to say.

All fair and just you'd imagine, except that it transpired that in this particular case brother was the errant party. He'd taken off with his younger and admittedly good-looking boss, abandoned his wife (and kids, the rotter), and headed south to her Somerset villa. So I suppose in the end all that was achieved for yours truly's efforts was that the CSA's claw-back became substantially reduced, and brother's pocket money became undeservedly enhanced.

So, unfortunately, you find yourself in the reverse position, C. Role reversal (of the sexes, that is). Do think about taking a leaf from brother's book - rightly or wrongly - by chucking to the wind the (jointly run?) company to which you have referred; and by re-inventing yourself as a self-employed entity. When you take into account matters such as goodwill, which will undoubtedly reside with you, then you'd be able to effectively park all that is your bread winning business and resurrect it at future will.

Good luck. I do so hope things work out well for you.

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Replying to I'msorryIhaven'taclue:
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By Catherine Newman
18th Jan 2022 22:25

Will consider it. Thank you very much for your support. I really appreciate it. My daughter lives with my ex and is leaving school in May after her A levels. He is apparently God's gift to parenting as he gives the girls a good time. I have to pay £78.98 per month as I pay £797.33 per month salary.

It is all about the child who spends their whole lives on social media and the whole nation will suffer extra NI to pay for it.

My ex thinks I am the higher earner and has applied for a mandatory review but that was in June but nothing has happened.

I am not paying dividends if I can help it unless absolutely necessary. My solicitor has it all stored up.

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By I'msorryIhaven'taclue
18th Jan 2022 22:41

Well the trading structure "advice" (I know, I get it.. I guess you know what you're doing) was just my take on how the wronged breadwinner might curl himself (or herself) up into a ball - hedgehog fashion - and thereby shell out minimal CSA payments; on the grounds that if he was able to avoid reimbursing the social security coffers he might instead retain a few bob by which to cash-purchase his kiddie(s) a decent pair of trainers; or maybe treat them to an outing rather than a wander round the park. All very commendable, I suppose.

Sounds as though you're on top of those assesable income matters. The oddest case (of any similarity) I recall was 10 years or more ago when neither side backed down and it all ended up in the High Court. The facts of the matter were not dissimilar to your case, in so far as it came as some surprise to the client that her husband had appointed her as a director and shareholder of his company; and that she was therefore somewhat responsible, albeit vicariously, for its £20m losses.

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Replying to I'msorryIhaven'taclue:
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By Catherine Newman
19th Jan 2022 11:23

My solicitor has said I could just close my company. I really appreciate the support. I think the CSA are too swamped to even carry out a review. The application went in in June. They asked for my P60 as apparently dividends aren't taken into account.

My situation is exactly how you outline. I managed all of the finances. If I opened a regular saver in my name, I opened one in his. Sometimes he would ask for a breakdown of the finances. When he "nicked" the money he didn't do it online. He went into a branch and I only found out when the balance wasn't what I expected.

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Replying to Catherine Newman:
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By I'msorryIhaven'taclue
19th Jan 2022 12:03

I'm surprised the CSA don't bring divs into the equation - they certainly used to 10 or 15 years ago. Moreover, when a director was drawing a minimal salary they would sometimes attempt to bring the company's retained profits into the equation. To top it all for the payer being assessed, their new partner's disposable income would potentially count as their income (and you could perhaps see the point in that, if say you were to hitch up with someone new and pay him a salary or divs rather than pay yourself; but I always felt it was misused when new partner's income from totally unconnected and pre-existing employment was brought into the assessment).

It's the ownership of your business that could be your Achilles' heel. The Husband in my client's case was a professional (a broker, in fact) and accordingly claimed that the company's only value was he and his specialist skill and knowledge (along the lines of personal goodwill, I suppose). The wife, our side, had played no active part in the business and in fact had her own separate career (treading the boards). Nevertheless the company's value ended up going into the pot, to be divided up along with home, other properties, holiday homes and so on. I'm sure you'll see the danger! The wife had been a shareholder, as well as a nominal director, and that's all their was to it; she was entitled to a 50% share*.

*All that dragged on for some years, by which time the Husband had run the company into the ground and racked up £20m of losses and liquidation - which caused our side's legal team into the u-turn of arguing that wife wasn't part of the business after all, the reverse of their original contention.

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By Wanderer
18th Jan 2022 17:29

jusbowers wrote:

Advice on where to point new client.

The door?
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Replying to Wanderer:
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By AnnAccountant
18th Jan 2022 17:39

Couldn't agree more.

Our natural inclination is to help, especially if we can. However, the older I get, the more "selfish"/businessminded I become in how I spend my working time - and also about how I spend my decreasing amounts of patience and mental energy!

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A Putey FACA
By Arthur Putey
18th Jan 2022 18:40
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Replying to Arthur Putey:
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By Hugo Fair
18th Jan 2022 19:45

... a thread that is a perfect (if lengthy) encapsulation of why this forum is never going to resolve this type of scenario.

Why do people (however much I may empathise with them) think that accountants can sort out muddy legal waters?

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By johngroganjga
18th Jan 2022 19:07

As DJKL says, this is entirely a matter for her matrimonial solicitor, assuming she has one. If she doesn’t yet have one, now is the time to appoint one.

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By Leywood
18th Jan 2022 19:31

''Advice on where to point new client''.

Dare I say his dangly bits with a pair of scissors when he has been enticed down a dark alley one night.

Get the solicitor involved who did her divorce, will make him a wodge more in fees. May need a forensic Accountant on the case. Depends how much is at stake.

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By I'msorryIhaven'taclue
18th Jan 2022 21:49

Leywood wrote:

''Advice on where to point new client''.

Dare I say his dangly bits with a pair of scissors...

Ouch! Hands up anyone else who's feeling squeamish.

Leywood wrote:

Get the solicitor involved who did her divorce, will make him a wodge more in fees. May need a forensic Accountant on the case.

Or a forensic pathologist.

Leywood, you've evidently been reading too much Agatha Christie. Keep taking the tablets.

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Replying to Leywood:
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By Hugo Fair
18th Jan 2022 23:21

After reading your opening two lines, I had to check the comment wasn't posted by John Bobbitt ... in which case more than a forensic Accountant would be needed!

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Replying to Hugo Fair:
paddle steamer
By DJKL
19th Jan 2022 11:32

I nearly misread forensic- word association with Bobbitt, perhaps. (The name Bobbitt sticks we me as in the 60s my sister had a knitted rabbit she called Bobbit, but he had a carrot.

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By Tax Dragon
19th Jan 2022 06:47

The only issue you should be considering is whether to include the income (that she alleges is hers but says she hasn't received) in her tax return - and, if not, whether to amend 2019/20.

Everything else is legal and, as Hugo points out, you are an accountant not a lawyer. Is there in fact any ongoing legal action? You haven't said.

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Replying to Tax Dragon:
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By jusbowers
19th Jan 2022 08:24

Many thanks, as far as I am aware the divorce has been finalised in a relatively acrimonious manner and the client is not willing to approach her ex. Looking at the declared dividends and salary that she hasn't received approaching her solicitor would most likely exceed the tax paid and not worth the risk and cost of an HMRC investigation without more proof that she couldn't access the funds in that account.

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By jusbowers
19th Jan 2022 08:29

Many thanks for your time everyone, much appreciated, especially the more macabre suggestions!

Client is not willing to approach her ex, divorce has been finalised and actual amounts involved would not cover much more of a solicitors time in addition to my own fees especially as I would more proof that she couldn't access the "joint" account that the monies were paid into before stirring up HMRC.

jusbowers wrote:

Oh wise ones in my computer box I have had a new client come to me with a tale of woe.

In 2019/20 she split from her husband, she was employed by and also a shareholder at the time of a company of which husband was a director and shareholder, it comes to preparing her 2019/20 return and her ex agent includes dividends and salary on her return which she later realises she does not recognise. She has asked me to query this with the now ex employer and on receiving a ledger printout of her dividends and salary payments from her I noted that the final dividend and several salary payments have been made into a bank account which is not her personal one (and the dividend was noted on the ledger printout as being in her ex husband's name).

On asking for clarification the ex-employer has stated that the ledger printouts are correct and show payments to my client and are not in relation to the ex but are unwilling to furnish any information about who authorised the change in banking details etc or engage any further.

My client "thinks" that these payments were made into a joint bank account but that she never had access to it.

My feeling is that the ex-husband made the changes to banking details and issued himself a dividend in her name leaving her with the tax liability, but other than making a SARS report is there anywhere forward my client can go or is she stiffed out of this money -  which is a significant amount to her. She would also like to go back and change her 2019/20 tax return to take these transactions out however as they were made to a joint account, even though she had no access, I'm sure that HMRC wouldn't accept that argument and have declined to do this on the information I have.

Suggestions, ideas and thoughts on any new swear words for the idiot who has been stupid enough to look into this in mid January gratefully accepted.

 

 

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By Jekyll and Hyde
19th Jan 2022 11:17

Walk away. This is a divorce dispute and should be passed over to solicitors if the client wishes to persue litigation further. I don't think you currently have the whole facts of the case as you only have one side.

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By 356B
19th Jan 2022 11:21
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A Putey FACA
By Arthur Putey
19th Jan 2022 11:39

Although the client does not have an appetite for legal action against her spouse, it sounds as if the company is bigger than just him, and if he is not the only other shareholder/director she could perhaps make a claim against the company, if banking details were in fact changed without her knowledge or consent. The company would then have a claim against the ex-husband. She did not receive the money, and the company should not have made any changes to payees. If I were her I would include the income on my tax return and then contact HMRC to explain that she is unable to pay the tax because she has not received the money.

If you were prepared to assist with the tax aspects of this, you could always tell her you will do this in February once the rush is over, given the relaxation of penalties.

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Replying to Arthur Putey:
A Putey FACA
By Arthur Putey
19th Jan 2022 11:49

.. or maybe (having read the PNL comment referred to above which crossed with my original post) I would omit the dividend on the grounds that it had not been placed at my disposal. That might open an enquiry if the previous year's return were amended and tax reclaimed. And it would still leave the PAYE income as a claim against the company.

Legal territory, but not only related to to the divorce.

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By Tax Dragon
19th Jan 2022 12:02

I suggest PNL's comment should be read in context. That context was whether the company had made the funds available. Here, that has apparently happened... but the former husband has then 'stolen' them. It's not the same scenario.

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Replying to Tax Dragon:
A Putey FACA
By Arthur Putey
19th Jan 2022 14:07

I read it as being "at the disposal of .. [the shareholder]" but I wonder if "making available" is not achieved if they are given to, or taken by someone else without their consent. Mind you, I should probably brush up on what paying into a joint account means (if it has been done so improperly that is).

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By Tax Dragon
19th Jan 2022 14:37

I wonder all that too. But, whatever the correct tax treatment here, which I doubt any of us can tell from the information provided to us, my point was that Portia's comment was not made with the OP's scenario in mind. Has the company paid the dividend? Yes. Has someone received the dividend? Yes. This second answer distinguishes the two scenarios.

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By Michael Davies
21st Jan 2022 10:37

It ain’t a dividend;just pure theft.

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