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Finances / Finanzen » uk.finance » Tax year balls-up
| Tax year balls-up [message #379976] |
Di, 11 April 2006 23:35 |
|
Have a slightly difficult situation.
Situation is a small Ltd company, probably about =A390k/year revenue,
minimal expenses (providing IT contracting services), registered this
Jan.
The company invoiced for January and February 2006 together, for a
total of =A315k+vat, and then for March 2006, another =A310k. The company
did not receive cheque payment of the first invoice till April 3rd, and
the cheque did not clear till after the start of the 2006-2007 tax
year.
The result of this was no money in the company until a couple of days
ago.
Basically the situation now is that I want to make a payment to me and
the other shareholder (wife, holding 50% of the shares) of as much as
possible in order to use up our tax allowances for 2005-2006. I have
=A36k of basic allowance and she has about =A330k basic/lower allowance
useable. I am a director, she is not.
I have discovered that this might be tricky: dividends it seems are
taxed when the money is paid, not when the dividend is actually dated
(which could be back dated), so any *payment* now would fall into
2006-2007 tax year for the purposes of personal taxation, and with the
prospect of =A390k or so in earnings (going into the higher rate band if
all the money was paid as a dividen) in the company for 2006-2007, it's
obviously advantageous to get out as much as we can using our basic
rate allowance.
What I would like to do (or to have done already) is to pay three
months of salary totalling =A31200 to my wife (equivalent to the Primary
Threshold for NI), plus make a =A36000 dividend payment each (tax paid
by the corporation tax credit), which would release =A313,200 from the
company, with zero personal tax liability.
If this money was taken next year as a dividend under higher rate tax,
the tax payable would be =A33,300.
Unfortunately I have realised any dividends paid now would come in the
2006-2007 year, so the liability would be there for 2007.
The only suggestion I have is to make a loan note from the company to
myself to cover the dividend payment, and back dated to a date in the
2006 tax year, say March 31st, and repayable on the basis that the
company did not actually have any funds at the time, but would be
repaid when funds were received.
Regarding the PAYE, have I definitely got it right - if a company pays
with a slip dated say March 31st but does not actually make the payment
till April 6th, that is classed as 2007 income?
The amounts for the PAYE are fairly small, =A3300 in tax saved, plus the
=A3250 payment the Inland Revenue gives for filing online, which I guess
I wouldn't get if I didn't make a 2005-2006 PAYE payment.
Does anyone have any views on the legitimacy of using a loan note to
pay firstly the dividend, and secondly for the 2005-2006 salary
payments (I have heard of receiving loan notes for dividends, but never
for salary)? How would I draw up such an instrument?
I am assuming that the Inland Revenue would not view a dividend
received on say April 18th or 19th (if I were to pay them now) but
dated in 2005-2006 as legitimate.
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| Re: Tax year balls-up [message #379978 ] |
Mi, 12 April 2006 01:01 |
|
On 11 Apr 2006 14:35:32 -0700, barryjcorrigan [at] gmail.com wrote:
>Have a slightly difficult situation.
>
>Situation is a small Ltd company, probably about £90k/year revenue,
>minimal expenses (providing IT contracting services), registered this
>Jan.
>
>The company invoiced for January and February 2006 together, for a
>total of £15k+vat, and then for March 2006, another £10k. The company
>did not receive cheque payment of the first invoice till April 3rd, and
>the cheque did not clear till after the start of the 2006-2007 tax
>year.
>
>The result of this was no money in the company until a couple of days
>ago.
>
>Basically the situation now is that I want to make a payment to me and
>the other shareholder (wife, holding 50% of the shares) of as much as
>possible in order to use up our tax allowances for 2005-2006. I have
>£6k of basic allowance and she has about £30k basic/lower allowance
>useable. I am a director, she is not.
>
>I have discovered that this might be tricky: dividends it seems are
>taxed when the money is paid, not when the dividend is actually dated
>(which could be back dated), so any *payment* now would fall into
>2006-2007 tax year for the purposes of personal taxation, and with the
>prospect of £90k or so in earnings (going into the higher rate band if
>all the money was paid as a dividen) in the company for 2006-2007, it's
>obviously advantageous to get out as much as we can using our basic
>rate allowance.
>
>What I would like to do (or to have done already) is to pay three
>months of salary totalling £1200 to my wife (equivalent to the Primary
>Threshold for NI), plus make a £6000 dividend payment each (tax paid
>by the corporation tax credit), which would release £13,200 from the
>company, with zero personal tax liability.
>
>If this money was taken next year as a dividend under higher rate tax,
>the tax payable would be £3,300.
>
>Unfortunately I have realised any dividends paid now would come in the
>2006-2007 year, so the liability would be there for 2007.
>
>The only suggestion I have is to make a loan note from the company to
>myself to cover the dividend payment, and back dated to a date in the
>2006 tax year, say March 31st, and repayable on the basis that the
>company did not actually have any funds at the time, but would be
>repaid when funds were received.
>
How does this effect your taxable income?
>Regarding the PAYE, have I definitely got it right - if a company pays
>with a slip dated say March 31st but does not actually make the payment
>till April 6th, that is classed as 2007 income?
>
Earliest of entitlement to payment and payment. There's a few more
complications for directors.
>The amounts for the PAYE are fairly small, £300 in tax saved, plus the
>£250 payment the Inland Revenue gives for filing online, which I guess
>I wouldn't get if I didn't make a 2005-2006 PAYE payment.
>
£150
>Does anyone have any views on the legitimacy of using a loan note to
>pay firstly the dividend, and secondly for the 2005-2006 salary
>payments (I have heard of receiving loan notes for dividends, but never
>for salary)? How would I draw up such an instrument?
>
What do you mean by a loan note? What is the point?
>I am assuming that the Inland Revenue would not view a dividend
>received on say April 18th or 19th (if I were to pay them now) but
>dated in 2005-2006 as legitimate.
What do you mean by dated?
What about NCDR?
--
Peter Saxton from London
peter [at] petersaxton.co.uk
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| Re: Tax year balls-up [message #379980 ] |
Mi, 12 April 2006 02:29 |
|
Peter Saxton wrote:
> On 11 Apr 2006 14:35:32 -0700, barryjcorrigan [at] gmail.com wrote:
>
> >Have a slightly difficult situation.
> >
> >Situation is a small Ltd company, probably about =A390k/year revenue,
> >minimal expenses (providing IT contracting services), registered this
> >Jan.
> >
> >The company invoiced for January and February 2006 together, for a
> >total of =A315k+vat, and then for March 2006, another =A310k. The company
> >did not receive cheque payment of the first invoice till April 3rd, and
> >the cheque did not clear till after the start of the 2006-2007 tax
> >year.
> >
> >The result of this was no money in the company until a couple of days
> >ago.
> >
> >Basically the situation now is that I want to make a payment to me and
> >the other shareholder (wife, holding 50% of the shares) of as much as
> >possible in order to use up our tax allowances for 2005-2006. I have
> >=A36k of basic allowance and she has about =A330k basic/lower allowance
> >useable. I am a director, she is not.
> >
> >I have discovered that this might be tricky: dividends it seems are
> >taxed when the money is paid, not when the dividend is actually dated
> >(which could be back dated), so any *payment* now would fall into
> >2006-2007 tax year for the purposes of personal taxation, and with the
> >prospect of =A390k or so in earnings (going into the higher rate band if
> >all the money was paid as a dividen) in the company for 2006-2007, it's
> >obviously advantageous to get out as much as we can using our basic
> >rate allowance.
> >
> >What I would like to do (or to have done already) is to pay three
> >months of salary totalling =A31200 to my wife (equivalent to the Primary
> >Threshold for NI), plus make a =A36000 dividend payment each (tax paid
> >by the corporation tax credit), which would release =A313,200 from the
> >company, with zero personal tax liability.
> >
> >If this money was taken next year as a dividend under higher rate tax,
> >the tax payable would be =A33,300.
> >
> >Unfortunately I have realised any dividends paid now would come in the
> >2006-2007 year, so the liability would be there for 2007.
> >
> >The only suggestion I have is to make a loan note from the company to
> >myself to cover the dividend payment, and back dated to a date in the
> >2006 tax year, say March 31st, and repayable on the basis that the
> >company did not actually have any funds at the time, but would be
> >repaid when funds were received.
> >
> How does this effect your taxable income?
Well, let's say I will receive =A350,000 in the 2006-2007 year, and have
=A330,000 income for 2005-2006. If I make a =A35,000 dividend payment
from the company and it falls into 2005-2006, then there is no
additional tax to pay, I make =A335k in 2005/06, and =A350k in 2006/07.
If the =A35,000 falls in tax year 06/07, then as I believe I will earn
over the basic rate allowance, there will be higher rate tax to pay.
It appears to me that where you own a small company it is in your
interest to make full us of your basic rate allowance every year to pay
out the maximum dividend possible, given that ultimately it's probably
more useful for the money to be in my bank account, or other
investment, that sitting in the company's account.
> >Regarding the PAYE, have I definitely got it right - if a company pays
> >with a slip dated say March 31st but does not actually make the payment
> >till April 6th, that is classed as 2007 income?
> >
> Earliest of entitlement to payment and payment. There's a few more
> complications for directors.
Ok, so I can happily backdate the PAYE.
> >The amounts for the PAYE are fairly small, =A3300 in tax saved, plus the
> >=A3250 payment the Inland Revenue gives for filing online, which I guess
> >I wouldn't get if I didn't make a 2005-2006 PAYE payment.
> >
> =A3150
For the tax year 2005-2006 it says
file online for 2005-06 (return due by 19 May 2006) and get =A3250
http://www.hmrc.gov.uk/employers/onlineguide_smallemp.htm#6
> >Does anyone have any views on the legitimacy of using a loan note to
> >pay firstly the dividend, and secondly for the 2005-2006 salary
> >payments (I have heard of receiving loan notes for dividends, but never
> >for salary)? How would I draw up such an instrument?
> >
> What do you mean by a loan note? What is the point?
An IOU from the company to myself for the dividend amount, dated within
the 2005-2006 tax year.
The point would be if we were to now declare a dividend of say =A36,000
per share (2 shares), and date it March 31st 2006, but not pay it
until today, 12 April 2006, then the dividend would fall into tax year
2006-2007, for which I am anticipating earnings above the 40% bracket.
If a loan note/IOU dated March 31st 2006 were acceptable as a form of
payment of the dividend and not viewed badly by IR
> >I am assuming that the Inland Revenue would not view a dividend
> >received on say April 18th or 19th (if I were to pay them now) but
> >dated in 2005-2006 as legitimate.
>
> What do you mean by dated?
The paperwork would all be dated March 31st 2006, but the money would
not be paid until today (or later). The money would not start moving
until 2006-2007 tax year.
> What about NCDR?
My understanding is that where the profit exceeds =A350k there is no
difference in the underlying rate. My company's accounting period is
January 1 - December 31 2006, and the profit will exceed =A350k, so
there is no marginal relief. I guess it would be better if the
accounting period had ended around 31 March, so that =A325k income for
the period would attract marginal relief giving an underlying rate of
14.25%, saving about =A31100 if I didn't pay any dividends, by not
having to pay the 19% rate on NCDs. Unfortunately I can't take
advantage, so it makes sense to pay out the largest dividends I can. I
haven't examined closely but I believe the January 1st - April 5th
period should get a pro rate proprotion of =A350k, now the marginal
relief has been scrapped, which I would exceed.
I'm just worried about personal tax liability here.
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| Re: Tax year balls-up [message #379987 ] |
Mi, 12 April 2006 10:10 |
|
<barryjcorrigan [at] gmail.com> wrote in message
news:1144791332.762294.255680 [at] z34g2000cwc.googlegroups.com...
Have a slightly difficult situation.
Barry wrote:-
What I would like to do (or to have done already) is to pay three
months of salary totalling £1200 to my wife (equivalent to the Primary
Threshold for NI), plus make a £6000 dividend payment each (tax paid
by the corporation tax credit), which would release £13,200 from the
company, with zero personal tax liability.
Simon wrote:-
What duties did she undertake for the company to deserve this and was it
actually paid into HER bank account.
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| Re: Tax year balls-up [message #380000 ] |
Mi, 12 April 2006 16:20 |
|
barryjcorrigan [at] gmail.com wrote:
> Have a slightly difficult situation.
>
> Situation is a small Ltd company, probably about =A390k/year revenue,
> minimal expenses (providing IT contracting services), registered this
> Jan.
>
> The company invoiced for January and February 2006 together, for a
> total of =A315k+vat, and then for March 2006, another =A310k. The company
> did not receive cheque payment of the first invoice till April 3rd, and
> the cheque did not clear till after the start of the 2006-2007 tax
> year.
>
> The result of this was no money in the company until a couple of days
> ago.
>
> Basically the situation now is that I want to make a payment to me and
> the other shareholder (wife, holding 50% of the shares) of as much as
> possible in order to use up our tax allowances for 2005-2006. I have
> =A36k of basic allowance and she has about =A330k basic/lower allowance
> useable. I am a director, she is not.
>
> I have discovered that this might be tricky: dividends it seems are
> taxed when the money is paid, not when the dividend is actually dated
> (which could be back dated), so any *payment* now would fall into
> 2006-2007 tax year for the purposes of personal taxation, and with the
> prospect of =A390k or so in earnings (going into the higher rate band if
> all the money was paid as a dividen) in the company for 2006-2007, it's
> obviously advantageous to get out as much as we can using our basic
> rate allowance.
>
> What I would like to do (or to have done already) is to pay three
> months of salary totalling =A31200 to my wife (equivalent to the Primary
> Threshold for NI), plus make a =A36000 dividend payment each (tax paid
> by the corporation tax credit), which would release =A313,200 from the
> company, with zero personal tax liability.
>
> If this money was taken next year as a dividend under higher rate tax,
> the tax payable would be =A33,300.
>
> Unfortunately I have realised any dividends paid now would come in the
> 2006-2007 year, so the liability would be there for 2007.
>
> The only suggestion I have is to make a loan note from the company to
> myself to cover the dividend payment, and back dated to a date in the
> 2006 tax year, say March 31st, and repayable on the basis that the
> company did not actually have any funds at the time, but would be
> repaid when funds were received.
>
> Regarding the PAYE, have I definitely got it right - if a company pays
> with a slip dated say March 31st but does not actually make the payment
> till April 6th, that is classed as 2007 income?
>
> The amounts for the PAYE are fairly small, =A3300 in tax saved, plus the
> =A3250 payment the Inland Revenue gives for filing online, which I guess
> I wouldn't get if I didn't make a 2005-2006 PAYE payment.
>
> Does anyone have any views on the legitimacy of using a loan note to
> pay firstly the dividend, and secondly for the 2005-2006 salary
> payments (I have heard of receiving loan notes for dividends, but never
> for salary)? How would I draw up such an instrument?
>
> I am assuming that the Inland Revenue would not view a dividend
> received on say April 18th or 19th (if I were to pay them now) but
> dated in 2005-2006 as legitimate.
AIUI, you can declare the dividend in the 2006 tax year and leave it in
your account in the company.
However, IANAA and you should probably seek professional advice.
|
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| Re: Tax year balls-up [message #380002 ] |
Mi, 12 April 2006 16:33 |
|
shano wrote:
> barryjcorrigan [at] gmail.com wrote:
> > Have a slightly difficult situation.
> >
> > Situation is a small Ltd company, probably about =A390k/year revenue,
> > minimal expenses (providing IT contracting services), registered this
> > Jan.
> >
> > The company invoiced for January and February 2006 together, for a
> > total of =A315k+vat, and then for March 2006, another =A310k. The compa=
ny
> > did not receive cheque payment of the first invoice till April 3rd, and
> > the cheque did not clear till after the start of the 2006-2007 tax
> > year.
> >
> > The result of this was no money in the company until a couple of days
> > ago.
> >
> > Basically the situation now is that I want to make a payment to me and
> > the other shareholder (wife, holding 50% of the shares) of as much as
> > possible in order to use up our tax allowances for 2005-2006. I have
> > =A36k of basic allowance and she has about =A330k basic/lower allowance
> > useable. I am a director, she is not.
> >
> > I have discovered that this might be tricky: dividends it seems are
> > taxed when the money is paid, not when the dividend is actually dated
> > (which could be back dated), so any *payment* now would fall into
> > 2006-2007 tax year for the purposes of personal taxation, and with the
> > prospect of =A390k or so in earnings (going into the higher rate band if
> > all the money was paid as a dividen) in the company for 2006-2007, it's
> > obviously advantageous to get out as much as we can using our basic
> > rate allowance.
> >
> > What I would like to do (or to have done already) is to pay three
> > months of salary totalling =A31200 to my wife (equivalent to the Primary
> > Threshold for NI), plus make a =A36000 dividend payment each (tax paid
> > by the corporation tax credit), which would release =A313,200 from the
> > company, with zero personal tax liability.
> >
> > If this money was taken next year as a dividend under higher rate tax,
> > the tax payable would be =A33,300.
> >
> > Unfortunately I have realised any dividends paid now would come in the
> > 2006-2007 year, so the liability would be there for 2007.
> >
> > The only suggestion I have is to make a loan note from the company to
> > myself to cover the dividend payment, and back dated to a date in the
> > 2006 tax year, say March 31st, and repayable on the basis that the
> > company did not actually have any funds at the time, but would be
> > repaid when funds were received.
> >
> > Regarding the PAYE, have I definitely got it right - if a company pays
> > with a slip dated say March 31st but does not actually make the payment
> > till April 6th, that is classed as 2007 income?
> >
> > The amounts for the PAYE are fairly small, =A3300 in tax saved, plus the
> > =A3250 payment the Inland Revenue gives for filing online, which I guess
> > I wouldn't get if I didn't make a 2005-2006 PAYE payment.
> >
> > Does anyone have any views on the legitimacy of using a loan note to
> > pay firstly the dividend, and secondly for the 2005-2006 salary
> > payments (I have heard of receiving loan notes for dividends, but never
> > for salary)? How would I draw up such an instrument?
> >
> > I am assuming that the Inland Revenue would not view a dividend
> > received on say April 18th or 19th (if I were to pay them now) but
> > dated in 2005-2006 as legitimate.
>
>
> AIUI, you can declare the dividend in the 2006 tax year and leave it in
> your account in the company.
>
> However, IANAA and you should probably seek professional advice.
Any accountants out there who could help me sort this out on an ad hoc
basis?
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| Re: Tax year balls-up [message #380009 ] |
Mi, 12 April 2006 18:26 |
|
Pop over to www.contractoruk.com and try the bulletin boards there,
there are usually a couple of recommended accountants floating about.
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| Re: Tax year balls-up [message #380015 ] |
Mi, 12 April 2006 19:37 |
|
>I have discovered that this might be tricky: dividends it seems are
>taxed when the money is paid, not when the dividend is actually dated
>(which could be back dated)
What makes you think that you can legitimately back-date a dividend?
The dividend is taxable on the earlier of the date that it was declared
as payable or the date it was actually paid. Viz, if on 1 January you
declared a dividend as payable "on 5 Jan" then it is taxable on 5 Jan.
If on 1 Jan you simply declare a dividend as payable, it is taxable on
1 Jan. If you pay a dividend on 1 Jan but make the decalaration on 10
Jan then it is taxable on 1 Jan. However you cannot simply back-date a
dividend or make up the documentation to pretend that a dividend was
declared or payable on an earlier date. If you do, and by so doing you
get a tax advantage that would be fraud.
My advice is to consult an experienced accountant, otherwise you can
fall into all kinds of traps.
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| Re: Tax year balls-up [message #380020 ] |
Mi, 12 April 2006 20:22 |
|
<barryjcorrigan [at] gmail.com> wrote in message
news:1144852411.081328.4890 [at] g10g2000cwb.googlegroups.com...
SNIP
>>
>> AIUI, you can declare the dividend in the 2006 tax year and leave it in
>> your account in the company.
>>
>> However, IANAA and you should probably seek professional advice.
>Any accountants out there who could help me sort this out on an ad hoc
>basis?
The dividend issues are nowhere near as difficult or complex as you, or some
of the replies, are making out. You just need to know your way around the
system.
More than willing to assist, for a fee of course.
--
Paul Garbett
Garbetts Ltd - accountants
www.garbetts.com
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| Re: Tax year balls-up [message #380022 ] |
Mi, 12 April 2006 20:44 |
|
"SandalsMan" <jbenator [at] gmail.com> wrote in message
news:1144863454.270357.46300 [at] v46g2000cwv.googlegroups.com...
> >I have discovered that this might be tricky: dividends it seems are
>>taxed when the money is paid, not when the dividend is actually dated
>>(which could be back dated)
>
> What makes you think that you can legitimately back-date a dividend?
> The dividend is taxable on the earlier of the date that it was declared
> as payable or the date it was actually paid. Viz, if on 1 January you
> declared a dividend as payable "on 5 Jan" then it is taxable on 5 Jan.
> If on 1 Jan you simply declare a dividend as payable, it is taxable on
> 1 Jan. If you pay a dividend on 1 Jan but make the decalaration on 10
> Jan then it is taxable on 1 Jan. However you cannot simply back-date a
> dividend or make up the documentation to pretend that a dividend was
> declared or payable on an earlier date. If you do, and by so doing you
> get a tax advantage that would be fraud.
With respect, I think that's somewhat naive. It's rather like believeing
that clients don't sign tax returns until they're completed !
> My advice is to consult an experienced accountant, otherwise you can
> fall into all kinds of traps.
I don't quarrel with that. But the OP needs to act quickly, before P35s &
P14s are submitted.
--
Martin
[Remove barrier to reply]
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| Re: Tax year balls-up [message #380023 ] |
Mi, 12 April 2006 20:44 |
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"Paul Garbett" <paul.garbett [at] antispam-garbetts.com> wrote in message
news:e1jgck$jff$1$830fa7a5 [at] news.demon.co.uk...
>
> <barryjcorrigan [at] gmail.com> wrote in message
> news:1144852411.081328.4890 [at] g10g2000cwb.googlegroups.com...
>
> SNIP
>>>
>>> AIUI, you can declare the dividend in the 2006 tax year and leave it in
>>> your account in the company.
>>>
>>> However, IANAA and you should probably seek professional advice.
>
>>Any accountants out there who could help me sort this out on an ad hoc
>>basis?
>
> The dividend issues are nowhere near as difficult or complex as you, or
> some of the replies, are making out. You just need to know your way
> around the system.
Agreed
> More than willing to assist, for a fee of course.
Ditto :-)
--
Martin
[Remove barrier to reply]
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| Re: Tax year balls-up [message #380025 ] |
Mi, 12 April 2006 21:06 |
|
<barryjcorrigan [at] gmail.com> wrote:
> Peter Saxton wrote:
> > On 11 Apr 2006 14:35:32 -0700, barryjcorrigan [at] gmail.com wrote:
[]
> > >The company invoiced for January and February 2006 together, for a
> > >total of £15k+vat, and then for March 2006, another £10k. The company
> > >did not receive cheque payment of the first invoice till April 3rd, and
> > >the cheque did not clear till after the start of the 2006-2007 tax
> > >year.
> > >
> > >The result of this was no money in the company until a couple of days
> > >ago.
[loan notes]
> > What do you mean by a loan note? What is the point?
If the company declared a dividend on 31st march and paid by cheque,
which you didn't cash until last week, would that be OK?
rgds, Alan
--
99 Ducati 748BP, 95 Ducati 600SS, 81 Guzzi Monza, 74 MV Agusta 350
"Ride to Work, Work to Ride" SI# 7.067 DoD#1930 PGP Key 0xBDED56C5
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| Re: Tax year balls-up [message #380028 ] |
Mi, 12 April 2006 21:48 |
|
On 11 Apr 2006 17:29:30 -0700, barryjcorrigan [at] gmail.com wrote:
>
>Peter Saxton wrote:
>> On 11 Apr 2006 14:35:32 -0700, barryjcorrigan [at] gmail.com wrote:
>>
>> >Have a slightly difficult situation.
>> >
>> >Situation is a small Ltd company, probably about £90k/year revenue,
>> >minimal expenses (providing IT contracting services), registered this
>> >Jan.
>> >
>> >The company invoiced for January and February 2006 together, for a
>> >total of £15k+vat, and then for March 2006, another £10k. The company
>> >did not receive cheque payment of the first invoice till April 3rd, and
>> >the cheque did not clear till after the start of the 2006-2007 tax
>> >year.
>> >
>> >The result of this was no money in the company until a couple of days
>> >ago.
>> >
>> >Basically the situation now is that I want to make a payment to me and
>> >the other shareholder (wife, holding 50% of the shares) of as much as
>> >possible in order to use up our tax allowances for 2005-2006. I have
>> >£6k of basic allowance and she has about £30k basic/lower allowance
>> >useable. I am a director, she is not.
>> >
>> >I have discovered that this might be tricky: dividends it seems are
>> >taxed when the money is paid, not when the dividend is actually dated
>> >(which could be back dated), so any *payment* now would fall into
>> >2006-2007 tax year for the purposes of personal taxation, and with the
>> >prospect of £90k or so in earnings (going into the higher rate band if
>> >all the money was paid as a dividen) in the company for 2006-2007, it's
>> >obviously advantageous to get out as much as we can using our basic
>> >rate allowance.
>> >
>> >What I would like to do (or to have done already) is to pay three
>> >months of salary totalling £1200 to my wife (equivalent to the Primary
>> >Threshold for NI), plus make a £6000 dividend payment each (tax paid
>> >by the corporation tax credit), which would release £13,200 from the
>> >company, with zero personal tax liability.
>> >
>> >If this money was taken next year as a dividend under higher rate tax,
>> >the tax payable would be £3,300.
>> >
>> >Unfortunately I have realised any dividends paid now would come in the
>> >2006-2007 year, so the liability would be there for 2007.
>> >
>> >The only suggestion I have is to make a loan note from the company to
>> >myself to cover the dividend payment, and back dated to a date in the
>> >2006 tax year, say March 31st, and repayable on the basis that the
>> >company did not actually have any funds at the time, but would be
>> >repaid when funds were received.
>> >
>> How does this effect your taxable income?
>
>Well, let's say I will receive £50,000 in the 2006-2007 year, and have
>£30,000 income for 2005-2006. If I make a £5,000 dividend payment
>from the company and it falls into 2005-2006, then there is no
>additional tax to pay, I make £35k in 2005/06, and £50k in 2006/07.
>If the £5,000 falls in tax year 06/07, then as I believe I will earn
>over the basic rate allowance, there will be higher rate tax to pay.
>
>It appears to me that where you own a small company it is in your
>interest to make full us of your basic rate allowance every year to pay
>out the maximum dividend possible, given that ultimately it's probably
>more useful for the money to be in my bank account, or other
>investment, that sitting in the company's account.
>
I understand that concept but what is the effect of a "loan note"? Are
you saying you will lend the company money to enable it to make a
dividend payment to you?
>> >Regarding the PAYE, have I definitely got it right - if a company pays
>> >with a slip dated say March 31st but does not actually make the payment
>> >till April 6th, that is classed as 2007 income?
>> >
>> Earliest of entitlement to payment and payment. There's a few more
>> complications for directors.
>
>Ok, so I can happily backdate the PAYE.
>
>> >The amounts for the PAYE are fairly small, £300 in tax saved, plus the
>> >£250 payment the Inland Revenue gives for filing online, which I guess
>> >I wouldn't get if I didn't make a 2005-2006 PAYE payment.
>> >
>> £150
>
>For the tax year 2005-2006 it says
>
>file online for 2005-06 (return due by 19 May 2006) and get £250
>
>http://www.hmrc.gov.uk/employers/onlineguide_smallemp.htm#6
>
Apologies, when I first saw that I assumed the £250 was for 2004-2005
when there was the first incentive of £250 so I thought the next year
was only £150. Not like HMRC to update their website!
>> >Does anyone have any views on the legitimacy of using a loan note to
>> >pay firstly the dividend, and secondly for the 2005-2006 salary
>> >payments (I have heard of receiving loan notes for dividends, but never
>> >for salary)? How would I draw up such an instrument?
>> >
>> What do you mean by a loan note? What is the point?
>
>An IOU from the company to myself for the dividend amount, dated within
>the 2005-2006 tax year.
>
Why don't you just make a payment to the company from your private
funds?
>The point would be if we were to now declare a dividend of say £6,000
>per share (2 shares), and date it March 31st 2006, but not pay it
>until today, 12 April 2006, then the dividend would fall into tax year
>2006-2007, for which I am anticipating earnings above the 40% bracket.
>
>If a loan note/IOU dated March 31st 2006 were acceptable as a form of
>payment of the dividend and not viewed badly by IR
>
>> >I am assuming that the Inland Revenue would not view a dividend
>> >received on say April 18th or 19th (if I were to pay them now) but
>> >dated in 2005-2006 as legitimate.
>>
>> What do you mean by dated?
>
>The paperwork would all be dated March 31st 2006, but the money would
>not be paid until today (or later). The money would not start moving
>until 2006-2007 tax year.
>
>> What about NCDR?
>
>My understanding is that where the profit exceeds £50k there is no
>difference in the underlying rate. My company's accounting period is
>January 1 - December 31 2006, and the profit will exceed £50k, so
>there is no marginal relief. I guess it would be better if the
>accounting period had ended around 31 March, so that £25k income for
>the period would attract marginal relief giving an underlying rate of
>14.25%, saving about £1100 if I didn't pay any dividends, by not
>having to pay the 19% rate on NCDs. Unfortunately I can't take
>advantage, so it makes sense to pay out the largest dividends I can. I
>haven't examined closely but I believe the January 1st - April 5th
>period should get a pro rate proprotion of £50k, now the marginal
>relief has been scrapped, which I would exceed.
>
>I'm just worried about personal tax liability here.
You should worry about after tax income.
--
Peter Saxton from London
peter [at] petersaxton.co.uk
|
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|
| Re: Tax year balls-up [message #380030 ] |
Mi, 12 April 2006 21:56 |
|
On Wed, 12 Apr 2006 18:44:10 GMT, "Martin"
<ngng [at] ngngng.BARRIER.fsnet.co.uk> wrote:
>
>"SandalsMan" <jbenator [at] gmail.com> wrote in message
>news:1144863454.270357.46300 [at] v46g2000cwv.googlegroups.com...
>> >I have discovered that this might be tricky: dividends it seems are
>>>taxed when the money is paid, not when the dividend is actually dated
>>>(which could be back dated)
>>
>> What makes you think that you can legitimately back-date a dividend?
>> The dividend is taxable on the earlier of the date that it was declared
>> as payable or the date it was actually paid. Viz, if on 1 January you
>> declared a dividend as payable "on 5 Jan" then it is taxable on 5 Jan.
>> If on 1 Jan you simply declare a dividend as payable, it is taxable on
>> 1 Jan. If you pay a dividend on 1 Jan but make the decalaration on 10
>> Jan then it is taxable on 1 Jan. However you cannot simply back-date a
>> dividend or make up the documentation to pretend that a dividend was
>> declared or payable on an earlier date. If you do, and by so doing you
>> get a tax advantage that would be fraud.
>
>With respect, I think that's somewhat naive. It's rather like believeing
>that clients don't sign tax returns until they're completed !
>
I don't think he's being naive. He's saying it is fraud; which it is.
I'm sure he knows it goes on.
I find that I do the vast majority of my clients tax returns online
and most of my clients tax returns are sent by pdf for them to agree
before filing online. This makes it relatively painless to get someone
to take or post tax returns to about ten clients who don't have
internet access or not set up for online filing.
--
Peter Saxton from London
peter [at] petersaxton.co.uk
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| Re: Tax year balls-up [message #380066 ] |
Do, 13 April 2006 20:35 |
|
>With respect, I think that's somewhat naive. It's rather like believeing
>that clients don't sign tax returns until they're completed !
No Martin, it is not the same at all. If you deliberately gain a tax
advantage by making up documentation to pretend a dividend was declared
on a certain date when in fact it was not, then that is fraud and HMRC
could see it as a prosecutable offence. Believe me!
|
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| Re: Tax year balls-up [message #380067 ] |
Do, 13 April 2006 20:39 |
|
>I don't think he's being naive. He's saying it is fraud; which it is.
>I'm sure he knows it goes on.
Thanks Peter. The naivety of some people here scares me!
|
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| Re: Tax year balls-up [message #380088 ] |
Fr, 14 April 2006 17:24 |
|
SandalsMan wrote:
> >With respect, I think that's somewhat naive. It's rather like believeing
> >that clients don't sign tax returns until they're completed !
>
> No Martin, it is not the same at all. If you deliberately gain a tax
> advantage by making up documentation to pretend a dividend was declared
> on a certain date when in fact it was not, then that is fraud and HMRC
> could see it as a prosecutable offence. Believe me!
Much as it grieves me to support Martin, you are being naive. If a
dividend is declared and somebody forgets to finalise the
documentation, then that is what happens the length and breadth of
Britain.
The whole point about clients is that they don't understand paperwork.
That is why they employ accountants, to make sure it is all brought up
to date.
|
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| Re: Tax year balls-up [message #380097 ] |
Fr, 14 April 2006 19:49 |
|
Troy Steadman wrote:
> SandalsMan wrote:
> > >With respect, I think that's somewhat naive. It's rather like believe=
ing
> > >that clients don't sign tax returns until they're completed !
> >
> > No Martin, it is not the same at all. If you deliberately gain a tax
> > advantage by making up documentation to pretend a dividend was declared
> > on a certain date when in fact it was not, then that is fraud and HMRC
> > could see it as a prosecutable offence. Believe me!
>
> Much as it grieves me to support Martin, you are being naive. If a
> dividend is declared and somebody forgets to finalise the
> documentation, then that is what happens the length and breadth of
> Britain.
>
> The whole point about clients is that they don't understand paperwork.
> That is why they employ accountants, to make sure it is all brought up
> to date
I work for a small Ltd Co. My boss goes to the till, takes out =A350,
leave a note to that effect, and visits Sainbury's to buy =A34 of tea
and milk and a =A33.99 bunch of flowers for his wife.
Is that:
1) Salary advance or arrears?
2) Director's Loan drawn/overdrawn?
3) Dividend?
|
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| Re: Tax year balls-up [message #380101 ] |
Fr, 14 April 2006 20:51 |
|
On 14 Apr 2006 10:49:37 -0700, "Troy Steadman"
<troysteadman [at] yahoo.co.uk> wrote:
>Troy Steadman wrote:
>> SandalsMan wrote:
>> > >With respect, I think that's somewhat naive. It's rather like believeing
>> > >that clients don't sign tax returns until they're completed !
>> >
>> > No Martin, it is not the same at all. If you deliberately gain a tax
>> > advantage by making up documentation to pretend a dividend was declared
>> > on a certain date when in fact it was not, then that is fraud and HMRC
>> > could see it as a prosecutable offence. Believe me!
>>
>> Much as it grieves me to support Martin, you are being naive. If a
>> dividend is declared and somebody forgets to finalise the
>> documentation, then that is what happens the length and breadth of
>> Britain.
>>
>> The whole point about clients is that they don't understand paperwork.
>> That is why they employ accountants, to make sure it is all brought up
>> to date
>
>I work for a small Ltd Co. My boss goes to the till, takes out £50,
>leave a note to that effect, and visits Sainbury's to buy £4 of tea
>and milk and a £3.99 bunch of flowers for his wife.
>
>Is that:
>
>1) Salary advance or arrears?
>2) Director's Loan drawn/overdrawn?
>3) Dividend?
2 unless wages have been prepared and posted to a net wages account
rather than Directors Loan or a dividend has been declared
--
Peter Saxton from London
peter [at] petersaxton.co.uk
|
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| Re: Tax year balls-up [message #380107 ] |
Fr, 14 April 2006 23:43 |
|
Peter Saxton wrote:
> On 14 Apr 2006 10:49:37 -0700, "Troy Steadman"
> <troysteadman [at] yahoo.co.uk> wrote:
>
> >Troy Steadman wrote:
> >> SandalsMan wrote:
> >> > >With respect, I think that's somewhat naive. It's rather like beli=
eveing
> >> > >that clients don't sign tax returns until they're completed !
> >> >
> >> > No Martin, it is not the same at all. If you deliberately gain a tax
> >> > advantage by making up documentation to pretend a dividend was decla=
red
> >> > on a certain date when in fact it was not, then that is fraud and HM=
RC
> >> > could see it as a prosecutable offence. Believe me!
> >>
> >> Much as it grieves me to support Martin, you are being naive. If a
> >> dividend is declared and somebody forgets to finalise the
> >> documentation, then that is what happens the length and breadth of
> >> Britain.
> >>
> >> The whole point about clients is that they don't understand paperwork.
> >> That is why they employ accountants, to make sure it is all brought up
> >> to date
> >
> >I work for a small Ltd Co. My boss goes to the till, takes out =A350,
> >leave a note to that effect, and visits Sainbury's to buy =A34 of tea
> >and milk and a =A33.99 bunch of flowers for his wife.
> >
> >Is that:
> >
> >1) Salary advance or arrears?
> >2) Director's Loan drawn/overdrawn?
> >3) Dividend?
>
> 2 unless wages have been prepared and posted to a net wages account
> rather than Directors Loan or a dividend has been declared
Quite apart from the "timing" differences which make that statement
nonsensical, it could simply be reimbursement of mileage, or change
taken out of the till for the Petty Cash tin.
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| Re: Tax year balls-up [message #380108 ] |
Fr, 14 April 2006 23:54 |
|
"Troy Steadman" <troysteadman [at] yahoo.co.uk> wrote in message
news:1145050984.922613.316020 [at] i39g2000cwa.googlegroups.com...
Peter Saxton wrote:
> On 14 Apr 2006 10:49:37 -0700, "Troy Steadman"
> <troysteadman [at] yahoo.co.uk> wrote:
>
> >Troy Steadman wrote:
> >> SandalsMan wrote:
> >> > >With respect, I think that's somewhat naive. It's rather like
> >> > >believeing
> >> > >that clients don't sign tax returns until they're completed !
> >> >
> >> > No Martin, it is not the same at all. If you deliberately gain a tax
> >> > advantage by making up documentation to pretend a dividend was
> >> > declared
> >> > on a certain date when in fact it was not, then that is fraud and
> >> > HMRC
> >> > could see it as a prosecutable offence. Believe me!
> >>
> >> Much as it grieves me to support Martin, you are being naive. If a
> >> dividend is declared and somebody forgets to finalise the
> >> documentation, then that is what happens the length and breadth of
> >> Britain.
> >>
> >> The whole point about clients is that they don't understand paperwork.
> >> That is why they employ accountants, to make sure it is all brought up
> >> to date
> >
> >I work for a small Ltd Co. My boss goes to the till, takes out £50,
> >leave a note to that effect, and visits Sainbury's to buy £4 of tea
> >and milk and a £3.99 bunch of flowers for his wife.
> >
> >Is that:
> >
> >1) Salary advance or arrears?
> >2) Director's Loan drawn/overdrawn?
> >3) Dividend?
>
> 2 unless wages have been prepared and posted to a net wages account
> rather than Directors Loan or a dividend has been declared
Quite apart from the "timing" differences which make that statement
nonsensical, it could simply be reimbursement of mileage, or change
taken out of the till for the Petty Cash tin.
Actually, its a Round Sum Allowance and should be subject to PAYE and NIC
|
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| Re: Tax year balls-up [message #380109 ] |
Sa, 15 April 2006 00:06 |
|
Troy Steadman wrote:
> I work for a small Ltd Co. My boss goes to the till, takes out £50,
> leave a note to that effect, and visits Sainbury's to buy £4 of tea
> and milk and a £3.99 bunch of flowers for his wife.
>
> Is that:
>
> 1) Salary advance or arrears?
> 2) Director's Loan drawn/overdrawn?
> 3) Dividend?
None of the above. Only the other day he had forgotten the company charge
card when going to fill up the company car, so he'd paid for that out of
his own pocket. Came to exactly £50, as it happens, so he was just
reimbursing himself. The note was left as a reminder to himself to make
the right entries in the analytical imprest petty cash book later. He was
in a bit of a tizz, after all, having only just remembered the wife's
birthday, and the cheap flowers were *not* going to be enough, so with the
change from the tea, milk, and flowers, he got a £12 box of chocolates in
the vain hope that darling would be assuaged, at least temporarily, and a
£30 bottle of malt (for himself) in the likelier event that she would not.
|
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| Re: Tax year balls-up [message #380110 ] |
Sa, 15 April 2006 00:49 |
|
"Troy Steadman" <troysteadman [at] yahoo.co.uk> wrote in message
news:1145028240.258586.128240 [at] j33g2000cwa.googlegroups.com...
> SandalsMan wrote:
>> >With respect, I think that's somewhat naive. It's rather like
>> >believeing
>> >that clients don't sign tax returns until they're completed !
>>
>> No Martin, it is not the same at all. If you deliberately gain a tax
>> advantage by making up documentation to pretend a dividend was declared
>> on a certain date when in fact it was not, then that is fraud and HMRC
>> could see it as a prosecutable offence. Believe me!
>
> Much as it grieves me to support Martin
Thank you Troy. I would have thought you had grown accustomed to, if not
positively delighted at, us agreeing so much :-)
--
Martin
[Remove barrier to reply]
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| Re: Tax year balls-up [message #380111 ] |
Sa, 15 April 2006 00:49 |
|
"SandalsMan" <jbenator [at] gmail.com> wrote in message
news:1144953318.147728.158640 [at] e56g2000cwe.googlegroups.com...
> >With respect, I think that's somewhat naive. It's rather like believeing
>>that clients don't sign tax returns until they're completed !
>
> No Martin, it is not the same at all. If you deliberately gain a tax
> advantage by making up documentation to pretend a dividend was declared
> on a certain date when in fact it was not, then that is fraud and HMRC
> could see it as a prosecutable offence. Believe me!
I like your contention that it's only fraud if you deliberately gain a tax
advantage. Since when does the consequence determine whether or not a fraud
has been committed?
When my employer reimburses my March expenses on 6th April, is it fraudulent
if I net them off in the one tax return rather than enjoy a tax rebate for a
year?
Do you consider it fraud whenever a solicitor or other professional asks a
client to sign forms without dating them?
Rules are for the obedience of fools and the guidance of wise men. The wise
men, in my book, are pragmatic and realistic. Fraud doesn't come into it -
especially when all we're discussing is documenting the meeting the sole
director & member had with himself in the bath last week!
--
Martin
[Remove barrier to reply]
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| Re: Tax year balls-up [message #380116 ] |
Sa, 15 April 2006 09:54 |
|
On 14 Apr 2006 14:43:05 -0700, "Troy Steadman"
<troysteadman [at] yahoo.co.uk> wrote:
>Peter Saxton wrote:
>> On 14 Apr 2006 10:49:37 -0700, "Troy Steadman"
>> <troysteadman [at] yahoo.co.uk> wrote:
>>
>> >Troy Steadman wrote:
>> >> SandalsMan wrote:
>> >> > >With respect, I think that's somewhat naive. It's rather like believeing
>> >> > >that clients don't sign tax returns until they're completed !
>> >> >
>> >> > No Martin, it is not the same at all. If you deliberately gain a tax
>> >> > advantage by making up documentation to pretend a dividend was declared
>> >> > on a certain date when in fact it was not, then that is fraud and HMRC
>> >> > could see it as a prosecutable offence. Believe me!
>> >>
>> >> Much as it grieves me to support Martin, you are being naive. If a
>> >> dividend is declared and somebody forgets to finalise the
>> >> documentation, then that is what happens the length and breadth of
>> >> Britain.
>> >>
>> >> The whole point about clients is that they don't understand paperwork.
>> >> That is why they employ accountants, to make sure it is all brought up
>> >> to date
>> >
>> >I work for a small Ltd Co. My boss goes to the till, takes out £50,
>> >leave a note to that effect, and visits Sainbury's to buy £4 of tea
>> >and milk and a £3.99 bunch of flowers for his wife.
>> >
>> >Is that:
>> >
>> >1) Salary advance or arrears?
>> >2) Director's Loan drawn/overdrawn?
>> >3) Dividend?
>>
>> 2 unless wages have been prepared and posted to a net wages account
>> rather than Directors Loan or a dividend has been declared
>
>Quite apart from the "timing" differences which make that statement
>nonsensical, it could simply be reimbursement of mileage, or change
>taken out of the till for the Petty Cash tin.
What's nonsensical and why?
--
Peter Saxton from London
peter [at] petersaxton.co.uk
|
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| Re: Tax year balls-up [message #380117 ] |
Sa, 15 April 2006 10:05 |
|
>Much as it grieves me to support Martin, you are being naive. If a
>dividend is declared and somebody forgets to finalise the
>documentation, then that is what happens the length and breadth of
>Britain.
The whole point here, Troy, is that we are not talking about a dividend
having been declared prior to 6 April and only the documentation having
been put in place retrospectively. This is NOT a case of someone
forgetting to put in place the documentation or waiting for his
accountant to prepare the documents. This IS a case of the dividend
cannot have been declared before 11 April because the OP's original
question shows that he had not declared the dividend because he was
only asking for advice on 11 April. It is the date of declaration that
is important and the OP's posting is evidence that he had not declared
the dividend by 6 April. Any documentation that is now produced
showing otherwise would be considered to be fraudulent by HMRC if that
documentation pretended the dividend had been declared prior to 11
April and it was used to obtain or to try to obtain a tax advantage by
pretending that a dvidend was declared prior to 6 April.
|
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| Re: Tax year balls-up [message #380118 ] |
Sa, 15 April 2006 10:13 |
|
Peter Saxton wrote:
> On 14 Apr 2006 14:43:05 -0700, "Troy Steadman"
> <troysteadman [at] yahoo.co.uk> wrote:
>
> >Peter Saxton wrote:
> >> On 14 Apr 2006 10:49:37 -0700, "Troy Steadman"
> >> <troysteadman [at] yahoo.co.uk> wrote:
> >>
> >> >Troy Steadman wrote:
> >> >> SandalsMan wrote:
> >> >> > >With respect, I think that's somewhat naive. It's rather like b=
elieveing
> >> >> > >that clients don't sign tax returns until they're completed !
> >> >> >
> >> >> > No Martin, it is not the same at all. If you deliberately gain a=
tax
> >> >> > advantage by making up documentation to pretend a dividend was de=
clared
> >> >> > on a certain date when in fact it was not, then that is fraud and=
HMRC
> >> >> > could see it as a prosecutable offence. Believe me!
> >> >>
> >> >> Much as it grieves me to support Martin, you are being naive. If a
> >> >> dividend is declared and somebody forgets to finalise the
> >> >> documentation, then that is what happens the length and breadth of
> >> >> Britain.
> >> >>
> >> >> The whole point about clients is that they don't understand paperwo=
rk.
> >> >> That is why they employ accountants, to make sure it is all brought=
up
> >> >> to date
> >> >
> >> >I work for a small Ltd Co. My boss goes to the till, takes out =A350,
> >> >leave a note to that effect, and visits Sainbury's to buy =A34 of tea
> >> >and milk and a =A33.99 bunch of flowers for his wife.
> >> >
> >> >Is that:
> >> >
> >> >1) Salary advance or arrears?
> >> >2) Director's Loan drawn/overdrawn?
> >> >3) Dividend?
> >>
> >> 2 unless wages have been prepared and posted to a net wages account
> >> rather than Directors Loan or a dividend has been declared
> >
> >Quite apart from the "timing" differences which make that statement
> >nonsensical, it could simply be reimbursement of mileage, or change
> >taken out of the till for the Petty Cash tin.
>
> What's nonsensical and why?
The first one's nonsensical because my firm doesn't maintain double
entry records; simply an old fashioned hand written cash book. So
whether anything has been "posted to a net wages account" will be a
retrospective judgement taken by his accountant six months after the
company's year and, and with all transactions bearing that as a date.
|
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| Re: Tax year balls-up [message #380119 ] |
Sa, 15 April 2006 10:26 |
|
>I like your contention that it's only fraud if you deliberately gain a tax
>advantage.
It is not my contention, Martin, that it is ONLY fraud if you
deliberately gain a tax advantage. You are being rather simplistic in
reading that into my words. However if you commit fraud and you gain a
tax advantage by doing so then HMRC would view it very seriously. If
you commit fraud and there is no tax advantage then HMRC are likely to
be less interested, of course, but there are likely to be other parties
who would be interested
The instances you quote are not the same as deliberately creating a
document which pretends that something has happened when it has not,
and by that pretence there is a tax advantage. The evidence (in the
form of the original poster's words on this group) shows that the OP
cannot have declared the dividend prior to 11 April. To produce
documentation, minutes etc which pretend that there was a meeting last
week (in the bath or wherever) when on 11 April the poster asked for
advice and his posting showed that he had not at that date declared a
dividend would be potentially fraudulent if that documentation was
produced to HMRC in order to gain a tax advantage.
The OP would be well advised to consult an accountant well experienced
in these matters, and not rely upon someone who advocates the
production of fruadulent documentation which may lead him into all
kinds of problems should HMRC enquire into the circumstances. If the
solution relies upon HMRC not being told the truth or upon HMRC not
enquiring too deeply into the circumstances then he should beware!
Smoke and mirrors may not work!
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| Re: Tax year balls-up [message #380120 ] |
Sa, 15 April 2006 10:39 |
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SandalsMan wrote:
> >I like your contention that it's only fraud if you deliberately gain a tax
> >advantage.
>
> It is not my contention, Martin, that it is ONLY fraud if you
> deliberately gain a tax advantage. You are being rather simplistic in
> reading that into my words. However if you commit fraud and you gain a
> tax advantage by doing so then HMRC would view it very seriously. If
> you commit fraud and there is no tax advantage then HMRC are likely to
> be less interested, of course, but there are likely to be other parties
> who would be interested
>
> The instances you quote are not the same as deliberately creating a
> document which pretends that something has happened when it has not,
> and by that pretence there is a tax advantage. The evidence (in the
> form of the original poster's words on this group) shows that the OP
> cannot have declared the dividend prior to 11 April. To produce
> documentation, minutes etc which pretend that there was a meeting last
> week (in the bath or wherever) when on 11 April the poster asked for
> advice and his posting showed that he had not at that date declared a
> dividend would be potentially fraudulent if that documentation was
> produced to HMRC in order to gain a tax advantage.
>
> The OP would be well advised to consult an accountant well experienced
> in these matters, and not rely upon someone who advocates the
> production of fruadulent documentation which may lead him into all
> kinds of problems should HMRC enquire into the circumstances. If the
> solution relies upon HMRC not being told the truth or upon HMRC not
> enquiring too deeply into the circumstances then he should beware!
> Smoke and mirrors may not work!
This is a fantastic bit of back-pedalling, and certainly if you are
going to commit a misdemeanour it is best not to broadcast the fact to
Usenet. But...
1) OP takes professional advice.
2) Martin writes up "bathroom" notes or (more likely IME) nothing is
written at all until required by HMRC.
3) OP signs where he is told and the deed is done!
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| Re: Tax year balls-up [message #380122 ] |
Sa, 15 April 2006 10:47 |
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>This is a fantastic bit of back-pedalling,
Who is back-pedalling, Troy? Not me!
The OP was not looking to commit a misdemeanour but some of the
postings here were leading him that way. I was just trying to steer him
in the way of taking GOOD advice (which he will have to pay for) and
steering him away from fraudulent actions which he was being blindly
lead into.
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| Re: Tax year balls-up [message #380123 ] |
Sa, 15 April 2006 10:55 |
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> > >> "Troy Steadman" wrote:
> > >> >I work for a small Ltd Co. My boss goes to the till, takes out
> > >> >£50, leave a note to that effect, and visits Sainbury's to buy
> > >> >£4 of tea and milk and a £3.99 bunch of flowers for his wife.
> > >> >
> > >> >Is that:
> > >> >
> > >> >1) Salary advance or arrears?
> > >> >2) Director's Loan drawn/overdrawn?
> > >> >3) Dividend?
> > >>
> > >Peter Saxton wrote:
> > >> 2 unless wages have been prepared and posted to a net wages
> > >> account rather than Directors Loan or a dividend has been declared
> > >
> > "Troy Steadman" wrote:
> > >Quite apart from the "timing" differences which make
> > >that statement nonsensical, it could simply be reimbursement
> > >of mileage, or change taken out of the till for the Petty Cash tin.
>
"Troy Steadman" wrote
> The first one's nonsensical because my firm doesn't maintain double
> entry records; simply an old fashioned hand written cash book...
Never mind the accounts (which don't need to be prepared until a while
afterwards) -- what about a Payslip, has one been prepared and given
**on or before** the day payment was made, as required by law?
If not, then how can it be salary/wages?
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| Re: Tax year balls-up [message #380124 ] |
Sa, 15 April 2006 10:59 |
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"Troy Steadman" wrote
> 1) OP takes professional advice.
> 2) Martin writes up "bathroom" notes or (more likely
> IME) nothing is written at all until required by HMRC.
> 3) OP signs where he is told and the deed is done!
By "deed is done", you mean the fraud? :-((
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| Re: Tax year balls-up [message #380128 ] |
Sa, 15 April 2006 11:31 |
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Tim wrote:
> > > >> "Troy Steadman" wrote:
> > > >> >I work for a small Ltd Co. My boss goes to the till, takes out
> > > >> >=A350, leave a note to that effect, and visits Sainbury's to buy
> > > >> >=A34 of tea and milk and a =A33.99 bunch of flowers for his wife.
> > > >> >
> > > >> >Is that:
> > > >> >
> > > >> >1) Salary advance or arrears?
> > > >> >2) Director's Loan drawn/overdrawn?
> > > >> >3) Dividend?
> > > >>
> > > >Peter Saxton wrote:
> > > >> 2 unless wages have been prepared and posted to a net wages
> > > >> account rather than Directors Loan or a dividend has been declared
> > > >
> > > "Troy Steadman" wrote:
> > > >Quite apart from the "timing" differences which make
> > > >that statement nonsensical, it could simply be reimbursement
> > > >of mileage, or change taken out of the till for the Petty Cash tin.
> >
> "Troy Steadman" wrote
> > The first one's nonsensical because my firm doesn't maintain double
> > entry records; simply an old fashioned hand written cash book...
>
> Never mind the accounts (which don't need to be prepared until a while
> afterwards) -- what about a Payslip, has one been prepared and given
> **on or before** the day payment was made, as required by law?
> If not, then how can it be salary/wages?
Peter is not questioning the payslip and nor am I.
It is what happens to the Net payment. Is it paid into a Director's
Loan Account where it can be drawn down? Is it retained in a
(notionally separate) Net Wages Control A/C? And in that latter case,
if it is in the till, can the Director help himself to it and toddle
down to Sainsbury's?
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| Re: Tax year balls-up [message #380130 ] |
Sa, 15 April 2006 11:43 |
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Tim wrote:
> "Troy Steadman" wrote
> > 1) OP takes professional advice.
> > 2) Martin writes up "bathroom" notes or (more likely
> > IME) nothing is written at all until required by HMRC.
> > 3) OP signs where he is told and the deed is done!
>
> By "deed is done", you mean the fraud? :-((
I don't think the professional sees it that way. He sees it as
"correcting an error", "putting things right". All kinds of things go
wrong in the average business, and this is just another mistake to be
recified.
In much the same way that when you find yourself doing 35 in a 30mph
zone, you don't hand yourself in at the nearest police station.
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| Re: Tax year balls-up [message #380131 ] |
Sa, 15 April 2006 11:45 |
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> > > > >> "Troy Steadman" wrote:
> > > > >> >I work for a small Ltd Co. My boss goes to the till, takes out
> > > > >> >£50, leave a note to that effect, and visits Sainbury's to buy
> > > > >> >£4 of tea and milk and a £3.99 bunch of flowers for his wife.
> > > > >> >
> > > > >> >Is that:
> > > > >> >
> > > > >> >1) Salary advance or arrears?
> > > > >> >2) Director's Loan drawn/overdrawn?
> > > > >> >3) Dividend?
> > > > >>
> > > > >Peter Saxton wrote:
> > > > >> 2 unless wages have been prepared and posted to a net wages
> > > > >> account rather than Directors Loan or a dividend has been
declared
> > > > >
> > > > "Troy Steadman" wrote:
> > > > >Quite apart from the "timing" differences which make
> > > > >that statement nonsensical, it could simply be reimbursement
> > > > >of mileage, or change taken out of the till for the Petty Cash tin.
> > >
> > "Troy Steadman" wrot
> > > The first one's nonsensical because my firm doesn't maintain double
> > > entry records; simply an old fashioned hand written cash book...
> >
> "Tim" wrote
> > Never mind the accounts (which don't need to be prepared until a while
> > afterwards) -- what about a Payslip, has one been prepared and given
> > **on or before** the day payment was made, as required by law?
> > If not, then how can it be salary/wages?
>
"Troy Steadman" wrot
> Peter is not questioning the payslip and nor am I.
Maybe not, but I am - so what is it, has a payslip been properly produced?
"Troy Steadman" wrote
> It is what happens to the Net payment. Is it paid into a
> Director's Loan Account where it can be drawn down?
> Is it retained in a (notionally separate) Net Wages Control
> A/C? And in that latter case, if it is in the till, can the
> Director help himself to it and toddle down to Sainsbury's?
Reality doesn't need to reflect the accounts,
but rather the accounts need to reflect reality.
So your questions are nonsensical....
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| Re: Tax year balls-up [message #380132 ] |
Sa, 15 April 2006 11:47 |
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>I don't think the professional sees it that way. He sees it as
>"correcting an error", "putting things right". All kinds of things go
>wrong in the average business, and this is just another mistake to be
>recified.
In the circumstances we have outlined HMRC would see it as fraud. The
only question is; will they find out about it? In some cases they do!
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| Re: Tax year balls-up [message #380133 ] |
Sa, 15 April 2006 11:50 |
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> > "Troy Steadman" wrote
> > > 1) OP takes professional advice.
> > > 2) Martin writes up "bathroom" notes or (more likely
> > > IME) nothing is written at all until required by HMRC.
> > > 3) OP signs where he is told and the deed is done!
> >
> "Tim" wrote:
> > By "deed is done", you mean the fraud? :-((
>
"Troy Steadman" wrote
> I don't think the professional sees it that way. He
> sees it as "correcting an error", "putting things right".
> All kinds of things go wrong in the average business,
> and this is just another mistake to be recified.
You are suggesting that breaking the law is
OK if it helps you do want you want???!!!!!!
:-((
"Troy Steadman" wrote
> In much the same way that when you find
> yourself doing 35 in a 30mph zone, you don't
> hand yourself in at the nearest police station.
If I didn't, that wouldn't mean that I
hadn't broken the law. I would have done.
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| Re: Tax year balls-up [message #380135 ] |
Sa, 15 April 2006 11:53 |
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>Reality doesn't need to reflect the accounts,
>but rather the accounts need to reflect reality.
>So your questions are nonsensical....
Well said Tim.
I am appalled at some the the questionable, and dangerous, advice given
in this group, I must admit.
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| Re: Tax year balls-up [message #380143 ] |
Sa, 15 April 2006 12:36 |
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> > "Troy Steadman" wrote
> > > 1) OP takes professional advice.
> > > 2) Martin writes up "bathroom" notes or (more likely
> > > IME) nothing is written at all until required by HMRC.
> > > 3) OP signs where he is told and the deed is done!
> >
> "Tim" wrote:
> > By "deed is done", you mean the fraud? :-((
>
"Troy Steadman" wrote
> I don't think the professional sees it that way. He
> sees it as "correcting an error", "putting things right".
> All kinds of things go wrong in the average business,
> and this is just another mistake to be recified.
Just because they might get away with committing
fraud, doesn't mean that it hasn't been committed!
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| Re: Tax year balls-up [message #380146 ] |
Sa, 15 April 2006 12:54 |
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Tim wrote:
> > > > > >> "Troy Steadman" wrote:
> > > > > >> >I work for a small Ltd Co. My boss goes to the till, takes out
> > > > > >> >=A350, leave a note to that effect, and visits Sainbury's to =
buy
> > > > > >> >=A34 of tea and milk and a =A33.99 bunch of flowers for his w=
ife.
> > > > > >> >
> > > > > >> >Is that:
> > > > > >> >
> > > > > >> >1) Salary advance or arrears?
> > > > > >> >2) Director's Loan drawn/overdrawn?
> > > > > >> >3) Dividend?
> > > > > >>
> > > > > >Peter Saxton wrote:
> > > > > >> 2 unless wages have been prepared and posted to a net wages
> > > > > >> account rather than Directors Loan or a dividend has been
> declared
> > > > > >
> > > > > "Troy Steadman" wrote:
> > > > > >Quite apart from the "timing" differences which make
> > > > > >that statement nonsensical, it could simply be reimbursement
> > > > > >of mileage, or change taken out of the till for the Petty Cash t=
in.
> > > >
> > > "Troy Steadman" wrot
> > > > The first one's nonsensical because my firm doesn't maintain double
> > > > entry records; simply an old fashioned hand written cash book...
> > >
> > "Tim" wrote
> > > Never mind the accounts (which don't need to be prepared until a while
> > > afterwards) -- what about a Payslip, has one been prepared and given
> > > **on or before** the day payment was made, as required by law?
> > > If not, then how can it be salary/wages?
> >
> "Troy Steadman" wrot
> > Peter is not questioning the payslip and nor am I.
>
> Maybe not, but I am - so what is it, has a payslip been properly produced?
>
> "Troy Steadman" wrote
> > It is what happens to the Net payment. Is it paid into a
> > Director's Loan Account where it can be drawn down?
> > Is it retained in a (notionally separate) Net Wages Control
> > A/C? And in that latter case, if it is in the till, can the
> > Director help himself to it and toddle down to Sainsbury's?
>
> Reality doesn't need to reflect the accounts,
> but rather the accounts need to reflect reality.
> So your questions are nonsensical....
Huh? A Director's wages are usually run through the PAYE system, along
with everyone else's. The Net amount is often posted to a Net Wages
Control A/C:
DR: Salaries
CR PAYE/NI EES
CR: Net Wages Control
Maybe he is paid by:
1) A Cheque or BACS.
DR: Net Wages Control
CR: Bank
2) A Credit to his Current Account ("Director's Loan Account") with the
Company.
DR: Net Wages Control
CR: Director's Loan Account
3) Cash.
Peter is saying: "You can only do (3) if you have the amount sitting in
a Net Wages Control".
I'm saying is that my company has a till but doesn't maintain a Balance
Sheet. So it is a meaningless test.
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