Inter company transactions

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Just a quick query re: self assessment tax return

 

A client was paid more salary from company A into the bank than what was stated on P60, when queried the client stated there was a mess up from their side with payroll and to put the excess as a dividend stating he was a shareholder.

 

Now it has come to light client has another accountant dealing with company B, they have got in touch with us to say as client was not a shareholder of company A, cannot take a dividend and they will transfer the balance to company B through inter company transacations. Company A and Company B are not part of a group, can they do that?

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paddle steamer
By DJKL
17th Jan 2018 22:29

Two companies not part of a group can lend to and borrow from one another, that is not the issue.

However given company B presumably never declared a dividend ( or at least we are not aware it did at the date of payment)the accountants and their clients would appear to be attempting to rewrite history.

Whilst I presume your client is not a shareholder of A, I presume he is re B , this is why he can get a dividend from B but not from A, if he is also a director of B and/or is a director of A he appears possibly to be party to attempting to falsify the records of both companies.

This now puts you in a tricky position re your MLR responsibilities.

In reality Company A ought to treat the initial overpayment as a loan to an employee, this then on transfer to Company B becomes a loan to a participator of B, this is then cleared by the dividend B declares on whatever date B declares a dividend. Both companies need to deal with s455 issues and any P11D issues re what has actually happened.

What, if any, paperwork trail of Minutes etc have you seen?

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Replying to DJKL:
ALISK
By atleastisoundknowledgable...
17th Jan 2018 23:34

DJKL wrote:

What, if any, paperwork trail of Minutes etc have you seen?

I suspect we all know the answer to this question!

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Replying to DJKL:
ALISK
By atleastisoundknowledgable...
17th Jan 2018 23:35

Duplicate

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