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Shareholder split and issues with accountancy firm

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    #21
    Originally posted by stek View Post
    Who's the other shareholder? Spill the beans!
    Otherwise us cynical lot will assume its tax evasion...
    I presume the accountant also advised of the rules and S660A risks of doing the split and why this wasn't a good idea? If they didn't then the client was badly advised on this front too....
    Free advice and opinions - refunds are available if you are not 100% satisfied.

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      #22
      Originally posted by Wanderer View Post
      I presume the accountant also advised of the rules and S660A risks of doing the split and why this wasn't a good idea? If they didn't then the client was badly advised on this front too....
      Believe it or not, not all accountants share the same view (lots of interesting views on accounting web)

      I expect it was probably mentioned. Do you think OP listened or did their own research though?

      Comment


        #23
        Originally posted by Wanderer View Post
        I presume the accountant also advised of the rules and S660A risks of doing the split and why this wasn't a good idea? If they didn't then the client was badly advised on this front too....
        Went through the emails again and couldn't see the mention of S660A risks.

        @Stek: The other shareholder has been profoundly influential in me moving into contracting and helping me along the way. I felt by making the person a shareholder (with the original understanding provided by ex-accountant) gives me an opportunity to return the favor albeit financially. Thanks for your cynicism though - while there has been some quite useful replies, I am not surprised to see some responses have been quick knee jerk reactions.

        How unusual this issue might seem to others I was hoping that there would be some discussion around how such a trivial error can be made by the ex-accountant and largely by the firm. As the firm in question is large and established in nature I assume all the accountants are provided the same training and governance is in place to ensure mistakes made by accountants are spotted and rectified proactively. In this instance I was provided two different views by different accountants of the same firm.

        @TheCyclingProgrammer/DirtyDog: As the company year end is different from FY and considering other factors I am inclined towards making the payment to HMRC although reducing the tax liability so payments on account is not required. This will require a fraction of the dividends to be declared as loan and sorting out paperwork.

        Even though this will have a knock on impact on the on going FY and me personally paying additional and unexpected money for FY 12-13 and 13-14 I feel this is the correct course of action to take.

        I of course feel the firm in question has played a huge role in this situation which has resulted into such a big payment and I strongly feel the firm should also bear proportional share in the personal tax - current '3 month fee' is no where near the mark.

        Let's see how they treat their clients when things go wrong; where the client has only followed the guidelines provided by the firm.

        The refund amount is still being discussed with senior managers as I am not happy with current proposal. Understandably there is no timeline assigned to this activity; while I need to complete FY 12-13 tax return in 7 days. I'll have to take the risk and ask them to complete tax return while the decision on refund is evaluated.
        Last edited by HeadlessChicken; 22 January 2014, 06:07.

        Comment


          #24
          Originally posted by HeadlessChicken View Post
          Went through the emails again and couldn't see the mention of S660A risks.

          @Stek: The other shareholder has been profoundly influential in me moving into contracting and helping me along the way. I felt by making the person a shareholder (with the original understanding provided by ex-accountant) gives me an opportunity to return the favor albeit financially.
          I don't know you or your accountant so this isn't a personal judgement, just general advice: HMRC aren't stupid, they've see this all before. Thousands of times. If you think Stek has been cynical, wait until you meet with HMRC and they get medieval on you.


          Furthermore, I don't think any accountant could reasonably put their head in the sand with a disclaimer that it is up to the director to run their company as they see fit. In my opinion the accountant has a professional duty to intercept the request to allocate shares in the company to a third party and warn the director about the risks of doing this. IF they didn't issue a warning then I don't think they have done their job properly.
          If you are gifting shares to a third party other than your wife and HMRC have any suspicion you are retaining an interest in the shares and/or the income derived from them (ie, they would gift the income back to you in cash or in kind) OR it wasn't a truly unconditional gift which was not required to be repaid then you are in danger of being investigated for a breach of 660A of the UK Income and Corporation Taxes Act 1988 which may result in fines and a penalty for not paying the correct amount of tax,
          Free advice and opinions - refunds are available if you are not 100% satisfied.

          Comment


            #25
            It sounds like the share split/divident payments is one of those things which seems so obvious to most people that perhaps the accountant didn't fully spell it out.

            However, are you sure they didn't? What dividend template did you use?

            SJD's template (for example) says:

            "At a meeting of the Directors of the Company held on the above date, the availability of distributable profits was considered and it was proposed and resolved to confirm the payments to the shareholders of the Company Dividends in the proportion of their respective shareholdings in the amounts shown below."

            InTouch provide a spreadsheet template that does the calculation.

            What did your accountant give you? Are you sure it didn't explain the dividend split?

            Comment


              #26
              Originally posted by Wanderer View Post
              If you are gifting shares to a third party other than your wife and HMRC have any suspicion you are retaining an interest in the shares and/or the income derived from them (ie, they would gift the income back to you in cash or in kind) OR it wasn't a truly unconditional gift which was not required to be repaid then you are in danger of being investigated for a breach of 660A of the UK Income and Corporation Taxes Act 1988 which may result in fines and a penalty for not paying the correct amount of tax,
              Interesting quote: what's the source? It's almost correct apart from the "other than your spouse" bit (the scenarios above would catch spousal arrangements too) and the S660A bit, which is no longer the correct legislation.

              It's no wonder most of the advice on this is out if date though. It's been SIX years since Arctic and the failed attempt at a Family Business Tax!

              Comment


                #27
                Originally posted by TheCyclingProgrammer View Post
                Interesting quote: what's the source?
                Me

                That's what I'm thinking that the accountants should advise. Maybe I should have copyrighted it.
                Free advice and opinions - refunds are available if you are not 100% satisfied.

                Comment


                  #28
                  While we've all been hapless noobs at times, and sometimes the things you don't know, you don't know you need to know them... you didn't think the word "share" had some meaning, or wonder what the point was of dividing therm 82:18 at any point?
                  Originally posted by MaryPoppins
                  I'd still not breastfeed a nazi
                  Originally posted by vetran
                  Urine is quite nourishing

                  Comment


                    #29
                    Originally posted by Wanderer View Post
                    I don't know you or your accountant so this isn't a personal judgement, just general advice: HMRC aren't stupid, they've see this all before. Thousands of times. If you think Stek has been cynical, wait until you meet with HMRC and they get medieval on you.


                    Furthermore, I don't think any accountant could reasonably put their head in the sand with a disclaimer that it is up to the director to run their company as they see fit. In my opinion the accountant has a professional duty to intercept the request to allocate shares in the company to a third party and warn the director about the risks of doing this. IF they didn't issue a warning then I don't think they have done their job properly.
                    If you are gifting shares to a third party other than your wife and HMRC have any suspicion you are retaining an interest in the shares and/or the income derived from them (ie, they would gift the income back to you in cash or in kind) OR it wasn't a truly unconditional gift which was not required to be repaid then you are in danger of being investigated for a breach of 660A of the UK Income and Corporation Taxes Act 1988 which may result in fines and a penalty for not paying the correct amount of tax,
                    Agree, Seems a bit suss to me, the OP states that the reason he gifted 18% of the shares to this mystery individual (I'm guessing not the missus?) is that he wanted to return the favour as said individual was 'influential in OP going contracting and OP wanted to pass on some reward', I'm sorry but if that's the case why do you think the taxpayer should part fund this philanthropy? You can't just make any old Tom, Dick or Harry a shareholder so that you can utilise their tax free allowance and hope HMRC don't notice (the Arctic case aside)...

                    Comment


                      #30
                      Originally posted by kal View Post
                      You can't just make any old Tom, Dick or Harry a shareholder so that you can utilise their tax free allowance and hope HMRC don't notice (the Arctic case aside)...
                      You can if said shares and dividends do not make their way back to you. HMRC can't stop you from giving away a share in your company if you want to.

                      The only people you can't do this with are your spouse, unless the exemption applies, or your children. The settlements legislation generally doesn't come into play with anybody else. Even HMRC openly state this.

                      I do wish people would make some effort to understand the legislation if they are going to bring it up.

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