No Dividends paid to 2nd share holder-company dissolved now

[ISingh]

Hi Guys,
I need your help. can you please take few minutes to read my issue and advise if it can create any problem for me in my next application: (Apologies for the long note below but I wanted to explain it in detail for a clear picture)

I have been in the UK under HSMP (Obtained in January 2008) and then got extensions under Tier 1 General. I actually have to take another Tier 1 general EXTENSION as I went out of UK for a couple of months and I dont meet the 180 days outside UK criteria to be elligible for ILR now.

My issue:

During the last Tier 1 Extension I showed Income proof (Dividends) from my Limited company (1st 3 months when I was working in a contract job through my own ltd Co. as Director) Plus Salary Slips from a Permanent Job for the next 9 Months. (Left contracting and took a permanent job)
Totalling earnings earned in 12 months prior to my extn application. I successfully got the extension under Tier 1 General.

The issue is: My Limited company had 1200 shares. 1000 allocated to ME and 200 allocated to another share holder.
During the last Tier 1 Extension, I took all the 100 Percent Dividend and didnt pay any dividend to the share holder. I showed all dividend paid to me in application to UKBA
Actually I had discussed it with my accountant and we had decided to transfer all shares on my name at the end of the year when we had to actually file all returns to HMRC and close the company as I had gone into a permanent job and didnt need the Ltd company anymore.

So, I got the Extension that time and asked my accountant to close the company. He started the company dissolving process but somehow we missed transferring all shares to me and as earlier had all dividends paid only to me. Even I was bit careless and didnt really bothered about 200 shares on another persons name in my company. I paid HMRC the Corporation tax and VAT whatever was calculated and closed the company. Now the company is dissolved and struck off and I need to apply for my Second Tier 1 General Extension as I need to spend some more time in the UK to be elligible for ILR.

My concern is that since we have missed transferring all shares to my name but I had taken all the Dividends that time (i.e. 2 years ago), would it create any issue for me in my next Tier 1 Extension?? I am in a permanent job now and will just be using income earned in the last 12 months from this job and this time there is nothing to do with my Ltd Company which operated for just 3 months and now closed.

I am really worried that if Home Office checks these records will they find out and will they question me that why the second share holder was not paid any dividends and will it create issues in my extension this time? Does Home Office bother goin into so much depth of previous applications?

As I said my Ltd company just operated for 3 months and is dissolved now. I have paid all the Taxes and VAT that was calculated to HMRC. Just worried about the dividends not being paid to the second shareholder. Is it really a serious issue?

Please help me on this and I would really appreciate if you could give me some advise.
Awaiting your responses.
Many Thanks
I Singh

[Wanderer]

As I said my Ltd company just operated for 3 months and is dissolved now. I have paid all the Taxes and VAT that was calculated to HMRC. Just worried about the dividends not being paid to the second shareholder. Is it really a serious issue?

If the shareholder agrees that they don't want the dividend payment then you can just get them to sign a dividend waiver and it's all sorted. Your accountant had write this up for you, it's no big deal.

[northernladuk]

If the shareholder agrees that they don't want the dividend payment then you can just get them to sign a dividend waiver and it's all sorted. Your accountant had write this up for you, it's no big deal.

Until HMRC start sniffing around beause you are using dividend waivers which are a very bad idea if you are trying to stay under the radar.

If you run your company this badly you have to expect the worst to happen, and quite rightly so IMO.

[Wanderer]

Until HMRC start sniffing around beause you are using dividend waivers which are a very bad idea if you are trying to stay under the radar.

That's true in the context where a director uses a dividend waiver as a tax avoidance measure (typically by waiving their right to a dividend in order to shift the income to their wife who is a lower rate tax payer).

Taking ISingh's case at face value, it sounds like there was no tax avoidance since the company only traded for a few months and ISingh is the majority shareholder who has taken the full dividend so I don't think there was any loss to the exchequer....

So long as the accounts are correctly prepared and filed, I can't see that there will be any question arising from the dividend waiver. Nothing to see here, move along.

[northernladuk]

That's true in the context where a director uses a dividend waiver as a tax avoidance measure (typically by waiving their right to a dividend in order to shift the income to their wife who is a lower rate tax payer).

Taking ISingh's case at face value, it sounds like there was no tax avoidance since the company only traded for a few months and ISingh is the majority shareholder who has taken the full dividend so I don't think there was any loss to the exchequer....

So long as the accounts are correctly prepared and filed, I can't see that there will be any question arising from the dividend waiver. Nothing to see here, move along.

And the 2nd shareholder is all above board and no dividends were paid for legitimate reasons? Incompetance and naivity isn't a defense when running a company badly.

[Wanderer]

And the 2nd shareholder is all above board and no dividends were paid for legitimate reasons? Incompetance and naivity isn't a defense when running a company badly.

I don't know what the intention was in this case but I'm under no illusions that many people set up a second shareholder to split income and avoid tax and if this isn't the director's spouse then it may give rise to a settlement which may make the dividend payment taxible on the director under the income shifting rules.

However, in this case the way it turned out was that ISingh took the whole dividend so there was no income split. If the shareholder agrees and signs the dividend waiver then there is no problem. Even if nothing is done then there is probably no problem anyway unless the shareholder complains that they didn't get their dividend payment...

[northernladuk]

I don't know what the intention was in this case but I'm under no illusions that many people set up a second shareholder to split income and avoid tax and if this isn't the director's spouse then it may give rise to a settlement which may make the dividend payment taxible on the director under the income shifting rules.

However, in this case the way it turned out was that ISingh took the whole dividend so there was no income split. If the shareholder agrees and signs the dividend waiver then there is no problem. Even if nothing is done then there is probably no problem anyway unless the shareholder complains that they didn't get their dividend payment...

I love your optimisim Wanderer. I so wish I could have a bit. All I see is a one sided story with elements glossed over or not mentioned looking for an answer he wants to hear. How many times do we get these questions and the information missed out is the key bit or not disclosed as they know it is not straight up. He would have said his 'wife' if that was the case. The 'other shareholder' sets the alarm bells ringing. That along with 'forgetting to pay the shareholder' starts to make this stink. Too many things wrong in this mail in my book.

But am a miserable b'stard so could be totally wrong... but still, doesn't look right to me. Anyway, bacon butty might help my view of the situation.

[Ketchup]

I think the pertinent question here is what salary was paid to each of the shareholders

[ISingh]

No Dividends paid to 2nd share holder-company dissolved now

I don't know what the intention was in this case but I'm under no illusions that many people set up a second shareholder to split income and avoid tax and if this isn't the director's spouse then it may give rise to a settlement which may make the dividend payment taxible on the director under the income shifting rules.

However, in this case the way it turned out was that ISingh took the whole dividend so there was no income split. If the shareholder agrees and signs the dividend waiver then there is no problem. Even if nothing is done then there is probably no problem anyway unless the shareholder complains that they didn't get their dividend payment...

Hello Guys,

Many thanks for your replies. I actually didnt get any notification for responses on my thread and so just lost touch. Somehow just checked it today and found your valuable comments under my query.

I would like to clarify that I didnt not want to do any kind of Tax avoidance etc by having a second share holder in my company. This was the first time ever I worked through my own Ltd Company and had no knowledge how things work. The person who created my company, asked me when creating it whether I want a shareholder in the company or not. I just told him to appoint my Uncle as the shareholder (Secretary) for 200 shares out of 1200. The rest 1000 allocated to me (Director). (Donno why I agreed to that!! Anyhow My mistake.)

As mentioned earlier I had discussed with my accountant that we wil transfer all shares to my name before closing the company. I paid all taxes calculated and asked my accountant to dissolve the co. as I had gone into a permanent job. He started the process. I didnt bother much as I started doin a permanent job and he closed the co.
I had never signed up for PAYE and never took salary as the company just operated for like 3 months and then I had to close it so registering for PAYE and deregistering etc would have been a hassle. I just took the dividends i mentioned above.

My Question:
My uncle agreed to not receive any dividend. But I didnt get any share waver form signed that time. Hez ok with it and can sign the DIVIDEND WAIVER form now or anytime. He will never raise any concern with HMRC or anyone that no dividend was paid to him. Will it be useful to keep that signed form with me just in case UKBA enquires about it next time I go for visa extension? Even though the company is completely dissolved now..
Also, where can I find the Dividend Waiver form? Can you please advise.

I'd really appreciate your response.

Many Thanks
ISingh

[northernladuk]

Hello Guys,

Many thanks for your replies. I actually didnt get any notification for responses on my thread and so just lost touch. Somehow just checked it today and found your valuable comments under my query.

I would like to clarify that I didnt not want to do any kind of Tax avoidance etc by having a second share holder in my company. This was the first time ever I worked through my own Ltd Company and had no knowledge how things work. The person who created my company, asked me when creating it whether I want a shareholder in the company or not. I just told him to appoint my Uncle as the shareholder (Secretary) for 200 shares out of 1200. The rest 1000 allocated to me (Director). (Donno why I agreed to that!! Anyhow My mistake.)

As mentioned earlier I had discussed with my accountant that we wil transfer all shares to my name before closing the company. I paid all taxes calculated and asked my accountant to dissolve the co. as I had gone into a permanent job. He started the process. I didnt bother much as I started doin a permanent job and he closed the co.
I had never signed up for PAYE and never took salary as the company just operated for like 3 months and then I had to close it so registering for PAYE and deregistering etc would have been a hassle. I just took the dividends i mentioned above.

My Question:
My uncle agreed to not receive any dividend. But I didnt get any share waver form signed that time. Hez ok with it and can sign the DIVIDEND WAIVER form now or anytime. He will never raise any concern with HMRC or anyone that no dividend was paid to him. Will it be useful to keep that signed form with me just in case UKBA enquires about it next time I go for visa extension? Even though the company is completely dissolved now..
Also, where can I find the Dividend Waiver form? Can you please advise.

I'd really appreciate your response.

Many Thanks
ISingh

Dividends to family members, not your spouse? Oh dear, knew there would be more to this.