Anyone bring forward dividends to the current tax year?

[WordIsBond]

And therin lies the problem- how many Contractor Ltd's will be tempted to overstate accrued income in order to bolster the max dividend payable this tax year.

It's pretty straightforward. However you account for work in progress in your annual accounts, you'd best do it the same way again on 5 April, or any investigation won't go too well for you. If you use a different method, it's likely to be viewed as tax evasion, not merely an honest mistake or even aggressive avoidance.

[Jessica@WhiteFieldTax]

Never heard of accrual accounting before (maybe it has another name).

So it's a solid legal argument that a company should/must know its profit/loss position at any time? Or that it must when issuing dividends specifically?

S386 (2b) CA86


Companies Act 2006

And S830 (2)

Companies Act 2006

[PerfectStorm]

It's only worth doing if you KNOW you'll go into the higher rate next year. Otherwise you're taking on 25% tax now for the sake of it.

Assuming you've taken up to the higher rate by now.

[Hobosapien]

I've always used the cash accounting method where invoices only appear on the accounts when paid instead of as debtors until paid.

This allows me to know current profit up front (without having to take into account potential bad debtors) and take divis as I need them, usually with the accountant declaring the overall divi when doing year end based on what I've taken during the year.

So in theory I could take divis for profits received so far during the year and if circumstances changed for the worse (long term out of a contract or winding down company) could run out of cash in the company to pay any corp tax before it was due 9 months after the year end.

In practice this seems correct as I had a year or so off contracting a few years into it and wound down the Ltd then re-opened another when going back into contracting later (didn't know at the time I would go back so closed Ltd as it was redundant following unsuccessful attempt to try something else to earn income).

During the winding down over several months but before 9 when corp tax became due it ran out of cash from paying my salary, expenses, and operating costs. During closure (following the rules at the time, which have changed regarding liquidation) the crop tax bill was quashed as far as there was no objection closing the ltd and no follow up from HMRC wanting the corp tax.

Main thing is I was operating the company with intention to stick to the rules and it became a failed business rather than doing this as a way to avoid the tax which if investigated the director(s) become liable for debts if found to be operating incorrectly.