How do you get around this? My clients year end is 31s October and in the year has taken dividends. When I come to do his self assessment next April he would have taken further dividends between now and next April. As I only see his paperwork once a year I am not going to know what he has taken. So would I ask for his tax vouchers/ bank statements for that period ? I just wondered what others did?
You actually still have time to shorten his first period to March 2015. You will just need to get everything filed by 31 Dec.. bu-ut, you would have to do some work to March anyway to work out his profits/DLA/dividends.
Yes you log into companies house and it can be done in seconds.
No he hasn't done any dividend vouchers so I need to educate him. He's also taken a monthly "dividend" on top of his directors pay even though I suggested that he varies the amount and date....
Last question on this.... If he has taken a dividend each month of £1500 there should be 12 vouchers but what if the company owed him money from his DLA would you adjust one of the dividends to reflect this?
You wouldn't count any of it as dividends as they occured but rather take it to the DLA throughout the period cleared by one dividend (balancing the DLA) at the period end.
Remember that the dividend must not exceed the profit available to award it from.
Only one dividend voucher needs to be created and it avoids HMRC claiming that the regular dividends are in fact disguised salary.
As you state, he needs to alter the amount and date as that too would indicate an extension of salary.
kindest regards,
Shaun.
__________________
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.
Are you doing the 2014-15 self assessment return? You would have to work out what could be voted Nov14-Mar15, looking at reserves and directors account balance on a monthly basis, and which will be most tax efficient... then when you do the Oct15 accounts, you would do the same again for the full year, to identify Apr15-Oct15 and then Nov15-Mar16.
You'd be looking to prove there was enough reserves to cover the dividend, and to keep any debit on his directors account under £10k at the end of each month, and, ideally, have it in credit at the end of October.
It might be that he doesnt draw a lot but has great reserves.. then you can just vote dividends per month that are tax efficient.
Of course, it would be wrong not to mention, that if you don't understand it enough, get a professional involved to help you wit the tax planning. Its not something you can remedy without seeing the figures etc, and looking at the whole picture.
I understand it, well I thought I did until I saw how it was done previously and then it's made me question things..... One dividend was produced at the end of his fy for £12,000 and that amount has been stated as dividends on his self assessment for 13/14?
The dividend is issued at the period end accounting for the money loaned from the company via the DLA throughout the period.
In the absence of a crystal ball how can someone in month one say that their company will make sufficient profit to issue a dividend in month twelve? Until month twelve the money is a loan which must either be repaid to the company by the director or cleared via a dividend at the period end.
Of course HMRC could still turn around and tell someone that they are taking regular amounts from the business which is in fact disguised salary and that gets into all sorts of arguments that most small businesses do not have the time and other resources to fight.
__________________
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.
just realised that I'm arguing the "There or there abouts" approach (tm RobH)
Your arguing the right way to do things.
OMG the lines in our respective positions have become obscured!
I'm sure that normal service will be resumed by myself later where I torture a poster for going against the spirit of some little read paragraph of an obscure financial reporting or ethical standard.
Now quick, go find a post where you can tell someone how we really do things so that balance is once more returned to the force.
Have a nice day now y'all
:D
__________________
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.
Ok thanks guys....sometimes I start to think about things, then I over think things, start chasing my tail and then disappear up my own backside. Mind you, after going to a HMRC Connect event my life will never be the same ....I now spend half my life in a state of worry and anxiety and question whether I'm in the right job ....
I now spend half my life in a state of worry and anxiety and question whether I'm in the right job ....
Many is the morning that I get out of bed and think they don't pay me enough for this.
Between ever changing rules and regulations plus clients who think that actually giving us the paperwork we need is an infringement of their civil liberties (which they make worse by just ignoring repeated emails and phone calls) you just start to think, if these clients can make this much money with this little intelligence, integrity and business acumen then why am I chasing around wiping their arses for them rather than running a company like one of theirs.
Then of course you get the good clients and the business owners who try to do everything correctly (not always successfully) and listen when you tell them where they are going wrong, or keep to the system that you have set up to organise them. Then, despite the issues associated with this you know that you are making a really positive impact on these peoples businesses.
Keep at it Georgie. Remember that it's HMRC's job to try and frighten you. Just keep reading the latest tax regulations and know when what they saying is how they would like tax law to be rather than as it actually is.
__________________
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.
You wouldn't count any of it as dividends as they occured but rather take it to the DLA throughout the period cleared by one dividend (balancing the DLA) at the period end.
Something I learn't on this forum a few weeks ago. Whilst it's never really cropped up on my very few Ltd Co's, it's good advice and I appreciate it being given.
__________________
John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
Thank you Shamus..it's nice to know that I'm not the only one who feels like this sometimes. And just for the record I would probably have given up long ago if it wasn't for this forum and the help you've all given me.
You wouldn't count any of it as dividends as they occured but rather take it to the DLA throughout the period cleared by one dividend (balancing the DLA) at the period end.
Hi Shaun! We passed in the post this morning and then I was straight out and about.
Georgie - what Shaun says is correct - any monies drawn in the year would be posted to DLA, as would any monies introduced/mileage/use of home/business items paid personally etc.
I would then work out what the closing balance was, on the last day of each month, to check it hadn't gone over £10k (a benefit in kind would arise after this was breached). If it doesn't go over £10k, happy day, one dividend is fine. If it does, you would have to stage dividends so they kept him under the limit.
So lets say, he only takes the £1500 a month and there's no capital introduced (keep it simple) - straight away, we see that by month 7, his balance would be £10500 overdrawn. So, you would need to look at the opening profit reserve, and the profit for up to month 6 (I deduct 20% for tax) and hopefully you will have enough to clear this below £10k
But also consider this... given that his year straddles the income tax year, if he had some basic rate band left to use for 2014-15, you would look at the profit to March (month 5) and vote the dividend then (albeit a smaller dividend)... because if he suddenly has a bumper second year, and wants to draw more in 2015-16, you have free'd up some of his basic rate band, by putting some dividend into the 2014-15 tax year.
I understand it, well I thought I did until I saw how it was done previously and then it's made me question things..... One dividend was produced at the end of his fy for £12,000 and that amount has been stated as dividends on his self assessment for 13/14?
Yes correct , which then made think what happened between the months November 13 and 5th April 14? Were no dividends reportedly taken in that period .? That's when I saw that the dividends reported on his accounts was the same figure reported on his self assessment for 13/14 ...even though his fy is 31st October.
