Reply to: Second shareholder dividends - Unhappy with advice from accountant regarding

[Forbes Young]

Hi, I've been using this forum since setting up my ltd co are year ago but this is my first post.
Some background:
I currently use one of the big contractor accountants, I'm not that happy with their fees or service so I'm thinking of changing accountants at year end (they don't know this yet). Currently if the business transfers money to my personal account my accountant automatically divides it between directors fees, expenses owed, and dividends. Apparently they then issuing the relevant dividends voucher, not that I've seen one.
They've just help me set up by wife a second shareholder (35%) so today I rang them to check the proper procedure for paying her her share. The person that I spoke at first told me that the business should just pay all money to me and then I personally transfer whatever my wife is owed from that directly to her. That doesn't sound at all correct to me so I questioned it and after speaking to one of her tax specialist she then advised that all money should be paid to a joint account, and that's what other contractors do. Again this rings alarm bells with me so I was told that my other option was that the company pays me as it does now, I then go into their money manager software and see what of that was allocated as dividends, the business would then need to pay my wife that amount and issue a dividends voucher (instead of the accountant issuing it). This sounds better - if a little messy - does it matter that my wife's voucher or payment wont happen until several days after mine?

I need to take money out to pay bills but I don't want to until I know that its being recorded correctly.

One more things, as mentioned I want to leave the current accountant at the end of the financial year. I pay them a monthly fee, should I expect the fees paid for the this year to cover the tax return which I assume will be completed a month or so after the end of year or do I need to keep paying them until it is submitted?

Thanks in advance

From what you say it's unclear who actually controls your company's bank account (yourself or your accountant?). If your accountants are controlling the bank account, are they a Managed Service Company Provider (MSC) so they/you are covered by the MSC legislation?
For the payment of dividends derived from ordinary shares, the dividends should be paid directly to the shareholders and the accounting transaction in your company accounts and associated paperwork should make this clear (and also differentiate between dividend payments, salary, reimbursed expenses etc)
Your last point regarding fees in advance for compiling accounts/what can be repaid to you/penalty fees for leaving your accountants etc should be stipulated in the letter of engagement that you/your accountants signed when they started acting for you.
Graeme Bennett ACMA MBA

[AndyAccountingIT]

Hi, I've been using this forum since setting up my ltd co are year ago but this is my first post.
Some background:
I currently use one of the big contractor accountants, I'm not that happy with their fees or service so I'm thinking of changing accountants at year end (they don't know this yet). Currently if the business transfers money to my personal account my accountant automatically divides it between directors fees, expenses owed, and dividends. Apparently they then issuing the relevant dividends voucher, not that I've seen one.
They've just help me set up by wife a second shareholder (35%) so today I rang them to check the proper procedure for paying her her share. The person that I spoke at first told me that the business should just pay all money to me and then I personally transfer whatever my wife is owed from that directly to her. That doesn't sound at all correct to me so I questioned it and after speaking to one of her tax specialist she then advised that all money should be paid to a joint account, and that's what other contractors do. Again this rings alarm bells with me so I was told that my other option was that the company pays me as it does now, I then go into their money manager software and see what of that was allocated as dividends, the business would then need to pay my wife that amount and issue a dividends voucher (instead of the accountant issuing it). This sounds better - if a little messy - does it matter that my wife's voucher or payment wont happen until several days after mine?

I need to take money out to pay bills but I don't want to until I know that its being recorded correctly.

One more things, as mentioned I want to leave the current accountant at the end of the financial year. I pay them a monthly fee, should I expect the fees paid for the this year to cover the tax return which I assume will be completed a month or so after the end of year or do I need to keep paying them until it is submitted?

Thanks in advance

We would recommend that amounts paid from the company match the amounts due to yourself and your wife.

We would advise you monthly of the salary and respective maximum regular dividends due (note-lower dividends can be drawn if preferred).

We would also confirm the expenses amounts to take after checking your claims as well as maintaining yearly dividend vouchers for each of you.

With regard to the company accounts, we would expect that having been paid to the year end your accountants would produce the accounts, but you would need to check with your current accountant.

[Whorty]

I use a small accountant over west of London and get a very personal service and excellent advice. They have a lot of experience with contractors and they always make sure I do the right thing - Robert Clow over in Northwood - give Robert a call and get this mess sorted out mate

[Jessica@WhiteFieldTax]

Very strange, and irregular advice from OPs accountant.

All valid concerns, but... change accountants now, don't wait.

^ tend to agree. It's not going to get any better.

[tractor]

...

Hi, I've been using this forum since setting up my ltd co are year ago but this is my first post.
Some background:
I currently use one of the big contractor accountants, I'm not that happy with their fees or service so I'm thinking of changing accountants at year end (they don't know this yet). Currently if the business transfers money to my personal account my accountant automatically divides it between directors fees, expenses owed, and dividends. Apparently they then issuing the relevant dividends voucher, not that I've seen one.
They've just help me set up by wife a second shareholder (35%) so today I rang them to check the proper procedure for paying her her share. The person that I spoke at first told me that the business should just pay all money to me and then I personally transfer whatever my wife is owed from that directly to her. That doesn't sound at all correct to me so I questioned it and after speaking to one of her tax specialist she then advised that all money should be paid to a joint account, and that's what other contractors do. Again this rings alarm bells with me so I was told that my other option was that the company pays me as it does now, I then go into their money manager software and see what of that was allocated as dividends, the business would then need to pay my wife that amount and issue a dividends voucher (instead of the accountant issuing it). This sounds better - if a little messy - does it matter that my wife's voucher or payment wont happen until several days after mine?

I need to take money out to pay bills but I don't want to until I know that its being recorded correctly.

One more things, as mentioned I want to leave the current accountant at the end of the financial year. I pay them a monthly fee, should I expect the fees paid for the this year to cover the tax return which I assume will be completed a month or so after the end of year or do I need to keep paying them until it is submitted?

Thanks in advance

It seems odd that every single concern you cover above has been asked and addressed quite adequately many, many times over the past year, with enough information given in the answers for anyone (you) to become fully familiar with such matters and yet you wait until almost your year end and even after new share issues.

Whatever the extra cost, you need to change accountants now. Obviously, there will be some transactional data that you will need from them to do this so either expect extra charges or be prepared to reconstruct your current year accounts from the information that you have to hand. As long as you have all the bank statements, that is a good start. Plus, what everyone else has said.

[TheCyclingProgrammer]

What if the second shareholder wasn't your spouse - just a business partner of some description?

Or what if your Ltd company had 25 or 50 shareholders?

Would they suggest that you pay all the dividends into your account and distribute payments accordingly?

That's bizarre.

Why stop at dividends? What about employee wages? Why not pay all of those into your account and redistribute from there?

[JRCT]

What if the second shareholder wasn't your spouse - just a business partner of some description?

Or what if your Ltd company had 25 or 50 shareholders?

Would they suggest that you pay all the dividends into your account and distribute payments accordingly?

That's bizarre.

[Sausage Surprise]

My Missus has her own account...god knows I'd have been bankrupt years ago if we had a joint account. Her divi is paid into that and covers various household standing orders/direct debits so she can't spend it

[flatlander]

Thanks for the replies, it looks like I was write to be concerned.
As I said they are one of the bigger Contractor Accountants so I'm really concerned at the advice. Maybe they are preoccupied giving away awards to new clients and their introducers, or trying to sell me poor value 'added value' services
I speak to someone different every time I call and I actually asked them the same question last month and gone a similar answer so it's not just one bad advisor.

[jamesbrown]

My point exactly.

Would also be surprised if it was one of the AccountantCo's that post on here regularly.

Indeed, and I'd be interested to know if it was! Terrible advice, but it could be the individual, as others mentioned (although you'd then have to wonder how good their QC/screening might be).

[Contreras]

I would do that as soon as possible before the mess gets any worse. Time is not your friend here.

My point exactly.

Would also be surprised if it was one of the AccountantCo's that post on here regularly.

[TheFaQQer]

I seem to remember in the past I've been given two different amounts to pay myself and one suggested B class shares aren't really a problem LOL...

To be fair, depending on your business structure, having multiple classes of shares ISN'T a problem. I know of a consultancy which does exactly this.

[TheFaQQer]

I currently use one of the big contractor accountants, I'm not that happy with their fees or service so I'm thinking of changing accountants at year end (they don't know this yet). Currently if the business transfers money to my personal account my accountant automatically divides it between directors fees, expenses owed, and dividends. Apparently they then issuing the relevant dividends voucher, not that I've seen one.

Who signed the minutes of the directors meeting where the dividend was authorised? If you haven't got the paperwork, then you run the risk that if you were investigated HMRC might see the whole lot as salary that hasn't attracted NI and PAYE. Not good news, so make sure you get copies of all the paperwork from your accountant before you tell them you are leaving.

They've just help me set up by wife a second shareholder (35%) so today I rang them to check the proper procedure for paying her her share. The person that I spoke at first told me that the business should just pay all money to me and then I personally transfer whatever my wife is owed from that directly to her. That doesn't sound at all correct to me so I questioned it and after speaking to one of her tax specialist she then advised that all money should be paid to a joint account, and that's what other contractors do. Again this rings alarm bells with me so I was told that my other option was that the company pays me as it does now, I then go into their money manager software and see what of that was allocated as dividends, the business would then need to pay my wife that amount and issue a dividends voucher (instead of the accountant issuing it). This sounds better - if a little messy - does it matter that my wife's voucher or payment wont happen until several days after mine?

This sounds incredibly bad advice - if there was an investigation, there is a clear paper trail which shows that all the money came to you and then you passed it on to your wife. Given that some accountants advise NOT to use a joint account (in case it flags something to HMRC), I can't understand why yours would be suggesting the opposite.

The idea that an accountant thinks that you should make a payment and then split everything afterwards is shockingly bad advice. By all means make one payment based on knowing what the figure means (I personally wouldn't, but there is another thread about that from yesterday), but to make a payment and then retrospectively work out how much was salary, how much was dividend and how much was expenses just seems like a quick way to trouble.

I need to take money out to pay bills but I don't want to until I know that its being recorded correctly.

It isn't. Without the minutes that are signed by a director, it's not being done properly.

One more things, as mentioned I want to leave the current accountant at the end of the financial year. I pay them a monthly fee, should I expect the fees paid for the this year to cover the tax return which I assume will be completed a month or so after the end of year or do I need to keep paying them until it is submitted?

If you've not paid for a full year, then they won't do it all for you. Personally, I'd get all the information you can put together, fire them and write off what you've already paid them. Then ring Louisa at InTouch, tell her I sent you her way (and get a free month from the referral!) and ask her very very nicely to sort it out for you.

I would do that as soon as possible before the mess gets any worse. Time is not your friend here.

[northernladuk]

I definitely decided to move, the only reason for waiting is to save paying a new accountant extra to do my year end accounts in effect I've pretty already much paid for it with the current one - just amortised out during the year.
That and I need to get the money out this week so don't want to wait until a new one is on board.

Holy moly.. You've never seen you dividend declaration paperwork? Pay all divis to you? Jeez LOL..... This sounds like someone that knows investigations are few and far between and has possibly never been nailed to the wall by one. Everything he says can be done but by god what a mess it will be when a notification of investigation comes through LOL... Oh, I think we agreed on the forum that most do pay in to a joint account and because shared expenses comes out of it it can't be argued it's giving tax benefit to any particular party. Sounds reasonable to me but I don't use my wife as a tax avoidance vehicle

Most of the bigger contractor accountants have accounts on here and post with them. Have a quick check for yours and PM them directly with your concerns. It may just be the individual you have assigned to you rather than the company as a whole that is the problem

This ^^ I've been with SJD and on the whole have been pretty good but I do know advice changes between accountants. I seem to remember in the past I've been given two different amounts to pay myself and one suggested B class shares aren't really a problem LOL... I'd generally go with what is suggested here. A quick call to a supervisor should clear it up and if you are questioning whether to stay with them just request a change of accountant. If you are not comfortable with this then yes bail to a new one but it's not the defacto option IMO.

[flatlander]

All valid concerns, but... change accountants now, don't wait.

Speak to a few and choose one you are happy with. They should be someone who understands contracting and able to explain what's wrong with your current accountant's approach. Yes there may be fees involved but waiting it out may cost you more.

I definitely decided to move, the only reason for waiting is to save paying a new accountant extra to do my year end accounts in effect I've pretty already much paid for it with the current one - just amortised out during the year.
That and I need to get the money out this week so don't want to wait until a new one is on board.