Reverse dividend in submitted company accounts by making amendment

[Pennydroppers]

Hello,

I had a directors loan of > 10k as at Jan 2017. I had a journal entry which had a dividend which then reduced the loan to zero. The company accounts were filed in May 2017. This has had a big impact on my personal self-assessment, with the dividend tax rate being pushed into the higher tax bracket.

Is it possible to cancel the dividend, and amend both the company and personal tax return? I will then be best to pay the S455 tax on the outstanding balance which is 25%. It hasn't been 12 months after filing, but i'm not sure if it's legal/allowed to change three returns:
1. HMRC Company Accounts
2. Companies House Filing
3. Personal Self-Assessment

The dividend was never declared fully on paper, just put through as a manual journal in the company accounts. I don't want to cross into any tax evasion territory, but i thought by making the amendment and paying the S455 tax due on the overdrawn amount this would be okay.

The company is now effectively dormant, after I am a PAYE employee since March 2016. I was considering entering into a MVL, but am happy to keep the company active if the above can be done.

Thanks

[craigy1874]

It can, technically, be done. But would you be comfortable standing up in court and saying that the accounts were incorrect the first time as this was definitely not meant to be a dividend?

If yes - go ahead.

If not, don't - as you are effectively re-writing history and causing potential problems for yourself.

[TheCyclingProgrammer]

Normally I’d say you can’t do this as it would be fraudulent, but if you never had any paperwork for the dividend in the first place I guess technically, it wasn’t even a legal dividend in the first place.

Of course, there’s no way to prove this to HMRC if it was questioned so that’s the risk you have to take.

What has your accountant said?

[Pennydroppers]

so the resubmission would trigger court proceedings? I figured that the amendement would be above board given that it was an error to have it as a dividend.

[TheCyclingProgrammer]

so the resubmission would trigger court proceedings? I figured that the amendement would be above board given that it was an error to have it as a dividend.

No, it wouldn’t automatically trigger anything, though an amendment to all three might potentially raise a flag somewhere for an enquiry.

[northernladuk]

so the resubmission would trigger court proceedings? I figured that the amendement would be above board given that it was an error to have it as a dividend.

Doesn't read as an error to me? Looks more like retrospectively altering your situation to reduce your tax burden. They really don't like that.

[TheFaQQer]

so the resubmission would trigger court proceedings? I figured that the amendement would be above board given that it was an error to have it as a dividend.

I think you're confusing "error" with "mistake".

You didn't make an error, you have now realised that you made a mistake because it was the wrong thing for you to do for tax purposes.

[TheCyclingProgrammer]

If OP had come on here saying they’d journaled a dividend in their accounts but had no paperwork and could they do the paperwork retrospectively, I’m sure would all be telling them that no, this would be fraudulent and the “dividend” should be treated as a director’s loan.

[craigy1874]

It wont automatically trigger court proceedings (or anything for that matter). What I was trying to say is that if you would be comfortable defending the issue in court then it could be that it was a genuine error.

It could however, raise a flag at HMRC and if they enquire into it and believe you were simply amending accounts as you didn't like the tax outcome, then you may well end up in court!

To summarise, only do this if you are sure you could defend the position.

[Pennydroppers]

so if it was a mistake, then this cannot be adjusted. If that is going to bring about penalties/scrutiny, perhaps i'll leave it. However, the tax burden is just shifting back to the company as it is/was the correct thing to do.