You have been given the correct advice here.
You can't rewrite history to get a better outcome. The funds were paid as dividends and that is what they are.
Your accountant isn't being cautious, he is giving you the correct advice.
Anyway, I have also read that HMRC are taking a case up to try and deny ER where the money has already been taken as loans. Interesting to see how they get on, as could affect a lot of clients if they win!
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Previously on "Reclassifying dividend as directors loan to take advantage of ER"
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There will be a record in FreeAgent, the bank statements, and with your accountant. Unless you can convincingly say it was done in error then the whatever tax saving isn't worth the potential aggro if HMRC look closely enough at it.
In future, if you want to stay flexible don't enter any details anywhere other than your own private spreadsheet until the year end accounts are due for preparation, then you can explain to your accountant what each transaction on the bank statement really is and they'll guide you accordingly while preparing the accounts for submission. That should work, probably.
That is in a way what I do, in that throughout each year I compile a spreadsheet of Ltd company transactions to match the bank statements and provide a description for each amount that my accountant then queries if they need more info or proof (receipts, invoices, ...) when they receive a subset of the spreadsheet and supporting bank statements relevant to the year end accounts they are preparing.
Depends on what paper trail exists or is necessary throughout the year as to how much manipulation potential there is that can be kept in the realm of allowable accountancy behaviour and not fall into the realm of tax evasion or fraud. Your accountant is the one to trust for that.
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Thank you for your replies everyone. You've convinced me that the risk isn't worth the benefit.
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Originally posted by throwaway123 View PostMy accountant feels that it's not advisable but I suspect he's being over-cautious in this instance. It comes down to whether FreeAgent would record the change. Does anyone happen to know this?
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Originally posted by throwaway123 View PostNot at all confident. If I feel after researching it that there is any chance that there will be a record of the reclassification I won't do it.
Thanks for the feedback everyone. Right now I'm erring towards caution.
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Originally posted by Lance View PostHow confident are you defending it under pressure?
Thanks for the feedback everyone. Right now I'm erring towards caution.
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Originally posted by throwaway123 View PostI have recently decided to close down my Ltd. I am considering reclassifying some of my old dividends from earlier this year as directors loan and repaying them into my company so as to take better advantage of ER when the Ltd is closed. This would involve reclassifying the loans in my accountancy software (Freeagent).
However I am worried that HMRC won't take kindly to this, does anyone have any opinion regarding whether this is a smart or dumb thing to do?
How confident are you defending it under pressure?
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My accountant feels that it's not advisable but I suspect he's being over-cautious in this instance. It comes down to whether FreeAgent would record the change. Does anyone happen to know this?
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As long as you haven't minuted the money taken out as a Dividend, then I can't see any reason not to be able to debit it to your Director's Loan account. It is just a Journal entry.
Ask your Accountant - IANYA
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Well you are clearly doing to avoid tax so it's hardly surprising to find out HMRC won't be overly happy.
That said I am not sure how they would find out as long as nothing has been filed yet. If you have an accountant I'd be speaking to them. On one hand it's blatantly aggressive, the other how would they know? See what your accountants approach to the risk is.
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Reclassifying dividend as directors loan to take advantage of ER
I have recently decided to close down my Ltd. I am considering reclassifying some of my old dividends from earlier this year as directors loan and repaying them into my company so as to take better advantage of ER when the Ltd is closed. This would involve reclassifying the loans in my accountancy software (Freeagent).
However I am worried that HMRC won't take kindly to this, does anyone have any opinion regarding whether this is a smart or dumb thing to do?Tags: None
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