I'm a bookkeeper, so don't normally get involved in directors tax returns, but just wanted to check something.
A friend has a limited company, and the year end is 31st December. He only had one dividend up to this date, as the business had only started in this year.
However, the tax return will be done for income to 5th April 2014, and he will have received more dividends by then, as he tells me that his income each month is part dividend, and part salary.
Would he put the one dividend actually declared for the year end to 31st December on the tax return, or would he include the dividends received to 05 April?
I have tried to do some research, and it would appear that the dividends received between the year end and April would be classed as interim dividends? If so, would they be included on the 05/04/2014 tax return?
He should be doing dividend vouchers and meeting minutes each time he pays himself a dividend, but this rarely happens, and the accountant usually sorts all this at the year end. Who is doing the company accounts? You will need to include all dividends paid within the tax year, regardless of interim or final. So he needs to tell you the dividends for Jan to 5th April... although he should have an accountant advising him so that he can make the most of his tax situation.
-- Edited by FoxAccountancyServices on Friday 12th of December 2014 12:50:44 PM
Thanks for your reply. As you said, although a voucher should be produced each time a dividend is paid, I've never seen it happen for a small company such as this.
I'm not sure of the accountant situation, I think that he is on the point of changing, and asked me to look over his tax return in the mean time.
Thanks for your advice, I'll ensure that all dividend payments are included that have been paid up to and including 05/04/2014.
Given that you have until 31 January to file, I would advise him to sort an accountant as soon as, and then get the accountant to look over the figures to date.. it could be that after accounting adjustments there is a loss and no dividend was actually allowable, or, it could be that he has taken money without considering the affect of corporation tax on the profit reserve, or, taken too little and he has scope to get some more money out of the company using any unused 20% tax band. Might be none of these, I am just running off the ones I come across in my day to day.
-- Edited by FoxAccountancyServices on Friday 12th of December 2014 01:32:26 PM
Thank you.
His company made a profit of £14880 after adding back depreciation, then took advantage of the AIA to claim for a vehicle purchased, amount of £18213, leaving tax losses of £3300. This was done by the accountant, to the best of my knowledge.
As the company itself made profit, will dividend payments be appropriate?
Vehicle? Hope that you didn't mean a normal unmodified car as AIA is not available on cars. (FYA's are on certain low emmission cars which can have the same effect as AIA).
Also, you state that the use of the AIA is creating a loss? Is any of the taxpayers personal allowance being thrown away as that should take presedence (no tax trumps low tax).
Sometimes you may find use of WDA's more beneficial to the client than use of the AIA where such creates a loss.
Also remember that Dividends are from After tax profits, not pre tax profits.
You state that the clients actions are on the back of instructions from the accountant "to the best of your knowledge".
It might be worth confirming that with the accountant.
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The OP says wage and dividend is being taken, so assuming there is a PAYE scheme in place utilising the PA. And the company loss will simply carry forward to next year. I expect the vehicle is a van, and so covered under the main pool. I think the first step is to find out what the accountant included as a dividend in the 2013 accounts, and were the "vouchers" all dated after 06.04.13. The bookkeeping can be used in conjunction with other calculations, to determine what profit after tax appear to be available to give an idea of the dividends that can be voted between Jan-Mar.
the main thrust of my reply was to pose the questions to which one should not simply assume.
Often wages will be linked to the NI rather than the tax band so not utilising the full PA.
If information from the client rather than the accountant there is the added element of matters being lost in translation as clients often feel that they understand tax where all too often they really don't.
On the car front, again it's a question that needs to be asked rather than simply accepting that its not a car.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thanks again.
Yes, the vehicle was a van, I should have confirmed that.
There was a PAYE in place.
The dividend in the accounts was the only one that the director had received, and the vouchers were dated prior year end, so happy with all that.
The director was employed prior to starting his company, so his personal allowance has been dealt with during his employment, so no 'throwing away' in that respect.
Thanks for your comments, it's really appreciated. I was asked to just confirm what had gone on, and, apart from the dividends for Jan to Mar needing calculating, all seems correct.
Great stuff Linda. Sean makes some very good points. I haven't focused too much on the van and PAYE, because you are not the accountant, and if he has done things wrong, that's not your problem. All you need to do is account for the December dividend as stated in the accounts, and get your friend and his accountant to give you the dividend figures for Jan-Mar14. The rest is really down to them, hun
