Final dividend and Self Assessment

[Hicks]

Good evening

My Limited company year end was the end of March 2009.

During the year, I never paid myself an interim dividend and, conscious of this, as my year end approached I aimed to do so.

However, for various reasons, I was un-able to do so.

I am now in the process of having my company accounts created and understand that I can still pay myself a final dividend once the accounts have been made up.

However, as this will mean paying myself a final dividend after the 2008/09 tax year, which ended on the 5 April 2009, am I correct to assume I will have to declare this final dividend on my 2009/10 Self Assessment tax return?

Hence, I presume this means I will not be able to pay myself any interim dividends during 2009/10 without pushing my income into the higher tax bracket.

If so, is there any (legal) way around this?

Has anyone been in a similar situation? If so, how did you address it?

TIA.

[blacjac]

The way my accountant has always advised to do this is:

Once the figures are finalised, and you know how much dividend you are going to take, back date the dividend declaration to just before the year end, then loan the money back to the company immediately. (I.e. no money actiually changes hands, but the books show a dividend paymnet of x and a directors loan back to the company of the same ammount).

All you have to do now is call in the loan from the company. 'Officially' you recieved the money last tax year.

I thought this sounded dodgy at first but my accountant assures me that 'everyone' does this .




Usual caveats, I am not your accountant, this is not an endorsement, I will neot be held responsible if it's wrong etc......

[ASB]

The way my accountant has always advised to do this is:

Once the figures are finalised, and you know how much dividend you are going to take, back date the dividend declaration to just before the year end, then loan the money back to the company immediately. (I.e. no money actiually changes hands, but the books show a dividend paymnet of x and a directors loan back to the company of the same ammount).

All you have to do now is call in the loan from the company. 'Officially' you recieved the money last tax year.

I thought this sounded dodgy at first but my accountant assures me that 'everyone' does this .




Usual caveats, I am not your accountant, this is not an endorsement, I will neot be held responsible if it's wrong etc......

Strictly you cannot backdate. The minutes etc declaring it are supposed to be contemporaneous. Though I'm sure it happens a quite a lot, it is striclty likely to be false accounting....

[Cheshire Cat]

Sounds like you've made a lot of work and/or headache for yourself unnecessarily.
For this next tax year, why not just pay yourself ~40k in salary and divs, and leave the rest in the company?

[Hicks]

Yes, the situation is not ideal.

Hence, the post to see if there is any legal way around it.

Is blacjacs suggestion viable? Is anyone else familiar with this process?

Or is there any other way around this?

TIA.

[EchoSierra]

Yes, the situation is not ideal.

Hence, the post to see if there is any legal way around it.

Is blacjacs suggestion viable? Is anyone else familiar with this process?

Or is there any other way around this?

TIA.

I guess you asked for a way "around this" and blackjac has proposed quite a feasible solution for your issue. However, ASB is right, strictly speaking you cannot backdate. Whenever you issue dividends you need to show this in company minutes, which means a company meeting (between the director(s) and secretary) took place. This happened at a certain date and time so whoever's signing off those minutes would be making a false declaration since no meeting took place and no dividend payments were discussed.

It would be hard to prove if you were audited but nevertheless ASB is technically right.

[blacjac]

As said above, ASB is technically correct, and I raised this with my accounant.

He assures me that it is not an issue, and that he has had multiple inspections for clients who have done this and never had a problem.

I'd be interested to know how the rest of you do it? I suppose it's only a problem for people who's company year end is around the same as the tax year end, my last Ltd's year end was also 31st March - which didn't give much time for sorting out a dividend.....

[ASB]

I rather imagine there was a board meeting in March at which the dividend (final or interim) was discussed. I expect the dividend was declared and the accounting measures made. I guess the dividend vouchers were printed and distributed to the shareholders. I suspect the OP simply forget to send these in to the accountants at the end of year because they had been unfortunately misfiled.

Its surprising how easily these minor admin cockups can occur. It's always worth checking the bottom of the filing cabinet when things seem to have been mislaid....

[blacjac]