Late CT submission to HMRC

Dormant company but has actually traded in the financial year

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I am hoping somebody can advice please. Client has a ltd company that is dormant at present. However, on discussion realised that all of the trade is done via the ltd company bank account, invoices issued with ltd company details on, an employee paid via the ltd company RTI return. Becuase of this I feel that the accounts should be completed and submitted to HMRC and then any directors salary and dividends to go into slef-assessment. The issue is that the year end in question is for August 2018 (Sep17 to Aug18) and the submission deadline has passed. Question is that is it safe to call HMRC and request to reopen the financial year as trading and then to submit the accounts, tax return and pay CT. Or calling HMRC can create issues. Cleints view is to enter all of the information in the self-assessment and they are hapy to pay any tax via this. But my view is that it should have been processed via the ltd company. Would appreciate any advice

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RLI
By lionofludesch
20th Jan 2020 14:51

What's been submitted to Companies House ?

Please don't say dormant accounts .....

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By Accountant A
20th Jan 2020 14:52

Lisa09 wrote:

Becuase of this I feel that the accounts should be completed and submitted to HMRC and then any directors salary and dividends to go into slef-assessment.

Good call.

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By Lisa09
20th Jan 2020 14:53

Yes, unfortunately they entered dormant accounts to CH

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Replying to Lisa09:
RLI
By lionofludesch
20th Jan 2020 15:03

Then I'd advise them to have the company struck from the register.

I'd also ask them to go elsewhere. They're an accident waiting to happen.

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By Lisa09
20th Jan 2020 15:11

It is a difficult one. They don't want to hide any income/expense. It's just that at the CH deadline stage they entered dormant information to meet deadline approaching and then never got round to it till now, with now the self-assessment deadline approaching.

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Replying to Lisa09:
RLI
By lionofludesch
20th Jan 2020 15:25

Lisa09 wrote:

It is a difficult one. They don't want to hide any income/expense. It's just that at the CH deadline stage they entered dormant information to meet deadline approaching and then never got round to it till now, with now the self-assessment deadline approaching.

OK - if they're truly contrite and you think you can educate them to be compliant, bearing in mind that they basically lied to Companies House and filed any old tosh to save a relatively trivial £150 late filing penalty, I'd still strike off the old company - after paying what's due to HMRC, obviously - and trade from a new one in future.

But I still think they'll be trouble. There's no easy way to put it. Here they are, prompted to consult you by a self assessment deadline approaching. Draw your own conclusions.

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By Lisa09
20th Jan 2020 15:31

Appreciate the reply Lino, you are right

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By Accountant A
20th Jan 2020 15:32

Lisa09 wrote:

any directors salary and dividends to go into slef-assessment.

Do you mean that salary and dividends were actually paid?

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By Lisa09
20th Jan 2020 15:37

Director has taken the money out of the company. No PAYE RTI return done for the director, other than another single employee. Therefore, I though about the drawings could be treated as a e.g. £8K director remuneration and the rest dividends.

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Replying to Lisa09:
RLI
By lionofludesch
20th Jan 2020 15:46

Lisa09 wrote:

Director has taken the money out of the company. No PAYE RTI return done for the director, other than another single employee. Therefore, I though about the drawings could be treated as a e.g. £8K director remuneration and the rest dividends.

No - it's a loan to the director. With matching s455 charge.

You can't rewrite history just because your client couldn't be bothered to arrange his affairs in the most tax efficient way. If you do this once, he'll expect it every year.

Every post you make makes this company seem less attractive as a client.

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Replying to Lisa09:
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By Accountant A
20th Jan 2020 15:46

Lisa09 wrote:

Director has taken the money out of the company. No PAYE RTI return done for the director, other than another single employee. Therefore, I though about the drawings could be treated as a e.g. £8K director remuneration and the rest dividends.

That would compound the problems, I would have thought. Were any dividends actually declared or is that just going to be made up retrospectively?

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Replying to Accountant A:
RLI
By lionofludesch
20th Jan 2020 15:53

Just to be clear, I'm inferring that nine months have already passed since the year end.

If not, maybe there's something to be done about the s455 charge. Who knows ?

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By Lisa09
20th Jan 2020 15:54

I agree, and rightly pointed lots of issues and brewing trouble.

Plus as I have not dealt this scenario before so a bit of education for me too via the thread.

Re dividends, retrospective, no paper work at the time of drawing.

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By Lisa09
20th Jan 2020 15:56

Nine months have already passed since Aug18, now in the territory of Aug19 year end.

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By frankfx
20th Jan 2020 16:33

''Plus as I have not dealt this scenario before so a bit of education for me too via the thread.

Re dividends, retrospective, no paper work at the time of drawing.''

Educating yourself on this case may not be the way to go.

For instance '' what is a retrospective dividend''.

The tangled web of deception awaits you.

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By Lisa09
20th Jan 2020 16:36

Thank you and I do appreciate the replies. I though there could be a correct way round the scenario but appears not, and a case for me to avoid.

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Replying to Lisa09:
RLI
By lionofludesch
20th Jan 2020 16:49

Lisa09 wrote:

Thank you and I do appreciate the replies. I though there could be a correct way round the scenario but appears not, and a case for me to avoid.

There is a correct way around it. (Not cheap for the client, mind.)

It's whether you want the PITA client.

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By ireallyshouldknowthisbut
20th Jan 2020 17:20

There is probably a good reason this has landed on your desk.

Ie a good number of other accountants have already said "I am rather busy, do jog on...."

Its certainly one for experienced hands.

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By Lisa09
20th Jan 2020 17:23

True

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By Matrix
20th Jan 2020 19:06

Quote for preparing revised company accounts and filing the CT600 tax return.

On his tax return, you can’t include the salary as it wasn’t reported under RTI, so just include the dividends on the self-assessment. I

If an employee has been paid then HMRC know about this company so the correct reporting is now required. Also dividends are paid after tax, so the tax needs to be paid as soon as possible. There will be interest but probably no penalties.

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Replying to Matrix:
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By Accountant A
20th Jan 2020 21:18

Matrix wrote:

On his tax return, you can’t include the salary as it wasn’t reported under RTI, so just include the dividends on the self-assessment.

There are no dividends. The OP said, in one of her posts: "Re dividends, retrospective, no paper work at the time of drawing."

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By Lisa09
20th Jan 2020 19:46

Thank you for the reply Matrix,

You you suggesting I can call HMRC to open the year ended Aug18 as trading and to submit accounts and ct600 ?? Just wanted to clarify please.

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Replying to Lisa09:
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By Matrix
20th Jan 2020 20:36

This is absolutely what you should do. If your client does not engage you to do this and you suspect that it will not be done then you will need to file a suspicious activity report.

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By Lisa09
20th Jan 2020 21:07

Thank you for the reply. I was worried by me calling them could create problems i.e. them start to ask questions why not called earlier etc. To be honest, my view is that if I can provide a legal service to earn a bit of money then I should try and find ways to assist, as in this case.

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Replying to Lisa09:
RLI
By lionofludesch
20th Jan 2020 21:20

Good luck with that.

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By Lisa09
20th Jan 2020 21:31

Thank you

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By frankfx
20th Jan 2020 21:45

"On his tax return, you can’t include the salary as it wasn’t reported under RTI, so just include the dividends on the self-assessment. ''

Perhaps it is salary.

The failure is not to have established a Paye scheme.

But not essential to have PAYE scheme if sole director and NIC earning levels not breached... and no other payroll sources... which may eat into personal allowance.

The other employee mentioned by OP does that get trapped in the Black Hole... Not subject to PAYE?

The absence of dividends in tax year to 5th April 2018 , part of limited year to August 2018.

How do you retrospectively and selectively decide if a payment one side of a tax year is DCA.

Then other side is dividend.

What will be the " quality" of the paperwork ?

Will you amend SA 2018?

For what... dividends that were not declared.

Benefits in kind.... overdrawn DCA

Again absence PAYE scheme does not mean no benefit arose.

Will there be a zero entry in tax return.
Perhaps additional information will suffice.

When will PAYE scheme be established.
This week?

Are there pension auto enrollment duties in respect of the employee.

Will the dormant accounts be withdrawn?

More than a restatement is required.

Layers of compliance risk that need to be identified and resolved.

Can you see that this is a snakes and ladders task?

£2,000 on account of fees may put some vigour into discussions.

What will your engagement letter say?

What will your covering letter with accounts and tax returns say...in the absence of contemporaneous compliance and associated documents.
Will you refer to the post fact ' paperwork'?

Envisage your role in ,"assisting" the client meet his obligations.

Enjoy.

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Replying to frankfx:
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By Matrix
20th Jan 2020 22:35

I understood there was a PAYE scheme for the employee and was not corrected.

The drawings could potentially be included on the SA return as dividends, I would probably refer to the bank statement in absence of paperwork. This is assuming the corporation tax returns are filed, I would do all or nothing for this client. I don’t know why everyone is getting so excited about s455 tax when no tax was paid on profits in the first place.

Tell us how you get on Lisa.

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Replying to Matrix:
RLI
By lionofludesch
20th Jan 2020 23:07

Matrix wrote:
I don’t know why everyone is getting so excited about s455 tax when no tax was paid on profits in the fiirst place.

Well, 19% tax on the profits + 32.5% on the loan amounts to a sizeable sum, albeit that the s455 charge is potentially repayable. One day.

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By Lisa09
20th Jan 2020 23:00

Thank you everyone, really appreciate the feedback. I will call HMRC and open the year end Aug18 and submit all, plus then submit amended to CH. Once this is done then all going forward will be ok. Any other action plan poses risks too, so might as well go this way. I realise the point re s455 and the self-assessment 2017/18. Need to see first what was withdrawn via bank statements.

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ALISK
By atleastisoundknowledgable...
21st Jan 2020 08:51

class the drawings as divis, redo the accounts, no s455, divi-only SATR; catch-up complete.

It overly annoys me when people say that you should never call a dividend a dividend if there’s no paperwork at the time. Do they honestly think that everything is noted and minitised in all OMB clients. ‘Decent’ clients maybe, but not small single-owner (one-man-band?) companies. It’s the technical v practical argument & I will always be on the practical side.

Moan over. Sorry.

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Replying to atleastisoundknowledgable...:
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By Lisa09
13th Feb 2020 13:11

Apologies, disappeared for a little while, thank you for the reply

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