hi. HMRC is using s.29 (discovery) on a tax return for 2015/16. The reason is the tax return figure for employment differs from the P60 (seems to be a error by previosu accountant) and as a result there is additional income tax to be paid because the maximum dividends were given. Even though the one year amendement window window has closed, I am thinking of getting the client to amend his 2015/16 return by reducing the dividends to avoid having to pay income tax. Can this be done legally? Many thanks.
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Can he legally retrospectively amend the value of declared dividends?
No.
Especially if he’s already told HMRC! IMO that will incite HMRC to push further.
What do the accounts say?
I presume that he will ‘find’ the ‘correct’ dividend paperwork signed at the time?
My comment about HMRC still stands. Depends what risk he attaches to not paying tax.
If he does go down that route, make sure that you have everything you want/need in writing (and nothing that you don’t want).
I am confused! What have the entries on the P60 to do with dividends????
What do you mean by referring to the 'maximum' dividends being entered on his return??
Let's re-phrase the question.
Can he legally lie to HMRC to evade tax?
Now, what do you think?
Feelings have nothing to do with it. You asked if he can do it legally. By re-phrasing the question, I've shown you that he can't.
I think if you start reducing dividends in the personal tax return this would open up the opportunity to investigate his companies corporation tax. If the money drawn wasn't a dividends does it not make it a directors loan with additional tax and a P11D? I assume he agreed his tax return therefore should he not have spotted the error on the P60? It sounds like a risky and possibly expensive strategy to save a few pounds.
What's the difference in tax payable?
Would the change be worth the possible investigatory catastrophe you could cause him ?
I'm not worried about your client, but I am worried about you. Your integrity is, shall we say, 'fluid'.
I wouldn't try changing any income history, without a strong genuine basis.
Subject to the materiality of the arising amounts, pay the tax and move on, unless you feel lucky and are prepared for battle.
You will need to be 100% confident that any retrospective changes are genuine and justified, not that you can go back and make changes anyway given that the historic income streams are final, notwithstanding errors in those too.
Not an area I would want to venture into without very strong grounds.
Surely if a dividend has been paid or not is a question of fact backed up by an appropriate Board minute?
I would be of the opinion that to retrospectively claim that a dividend was not received is playing with fire and would possibly mean that the whole return is incorrect.
Years ago I made sure all my companies had minutes supporting dividends but since the abolition of the AGM hardly any keep minutes. Is there a legal requirement to minute dividends? Is there a legal requirement to issue dividend vouchers?
Everything's possible. If you do that for the client ensure the fee is £4m as you can live nicely in Uruguay on that were there is no extradition treaty.
The other accountant messed it up. . Just tell him that's unfortunate, pay the tax and on the bright side it reduces the tax bill in the next year....and you wont let it happen as you check things....
If actually you did it not someone else. Stand up take the telling off, the worst that can happen is probably you lose a client.... not get kidnapped in S. America.
Check the dates of issue of the dividends. I took on a case where HMRC issued a discovery for (I think) 2012-13. On closer inspection turned out the first dividend was 05/04/12 so 2011-12 for the taxpayer even though 2012-13 in the company accounts.