Hi All,
Been with the same accountancy since started contracting – till now thought of receiving decent services but increasingly am finding myself in need of a change. Apologies for the long winded post but the issue (I believe) is complex and requires some explanation.
Based on the information provided to me by the accountant regarding shareholder split and tax free dividend for all company shareholders, I thought it would be beneficial to have another shareholder. Added a new shareholder with 18% shares allocation back in August 2012.
I was informed that each shareholder can take dividends out of the company and the total of individual (dividends + salary) should be less than roughly 42K to ensure dividends are not taxed.
Equipped with this information, I started drawing dividends for myself individually keeping my own salary in mind and trying to make sure that both (salary + dividends) combined should not breach the limit of around 42K. I applied the same rule to the other shareholder and ensured both do not cross the limit of 42K.
Months passed by, kept informing the accountant of monthly changes to the ‘xls’ and also dividend declaration forms. No issues highlighted. Thought I had managed to extract extra funds in form of tax free dividends from ltd through additional shareholder.
Meanwhile the original accountant moved on and got assigned new accountant and a came along new FY (13-14). Around September 2013 was asked to fill in a form which will be used to calculate personal tax return. Provided my own salary and the dividends figure which I withdrew from the company. After calculation I was informed that I owe HMRC around 2200 GBP – 1100 in tax due for FY 12-13 and as the tax was higher than 1000 I have to pay similar amount as payments on account for FY 13-14.
To my utter disbelief I asked the new accountant of what went wrong; why is there such a high tax due in spite of me not drawing additional funds out of the ltd as I thought that itll incur 25% charges.
I was now informed that every pound dividend drawn from the company after the addition of new shareholder needs to be split 82-18%. I drew around 34K as dividends assuming this plus my salary combined did not breach the 42K limit. The other shareholder drew amount equivalent to 42K minus the salary.
Now I am told that even the 34K taken have to be split by 82-18% rule. Even the dividend withdrew by the other shareholder had to be split.
I knew all along I was following the guidance provided to be by the (ex) accountant till the last word to make sure most tax efficient use of company funds. Still I have to pay 2200 pounds. Not being happy at all I reported the issue to new accountant; made her aware of the history and asked to suggest best course of action. Unfortunately it has been all downhill from that moment on.
After a lot of email exchanges the only suggestion I got was to declare some of the dividends as loan which will bring the tax to < 1000 and remove the need to pay payments on account. I felt I deserve a refund as I've only been following the guidance provided. Getting increasingly frustrated with the way how the situation was handled I had to escalate the matter to higher management. Got some traction to no avail and the situation remains as it is with the accountancy now willing to provide back ‘financial gesture of 3 months accountancy fees’.
Deadline of 31 Jan is imminent and I am still trying to finalize my personal tax return for FY 12-13. The way how I've been treated during this issue has definitely left a gaping hole in my mind with regards to the firm’s way of handling such a trivial matter – shareholder split and how to draw funds in such situation. I am talking about an established firm – winner of many awards year on year - and many of us should be with them. I am contemplating on leaving them as I would not like to find myself in similar situation with another issue.
Has anyone else been affected by shareholder split div. declaration issues before? Or are there others who feel they might be under the same boat? Appreciate any feedback on this matter.
TIA!
Been with the same accountancy since started contracting – till now thought of receiving decent services but increasingly am finding myself in need of a change. Apologies for the long winded post but the issue (I believe) is complex and requires some explanation.
Based on the information provided to me by the accountant regarding shareholder split and tax free dividend for all company shareholders, I thought it would be beneficial to have another shareholder. Added a new shareholder with 18% shares allocation back in August 2012.
I was informed that each shareholder can take dividends out of the company and the total of individual (dividends + salary) should be less than roughly 42K to ensure dividends are not taxed.
Equipped with this information, I started drawing dividends for myself individually keeping my own salary in mind and trying to make sure that both (salary + dividends) combined should not breach the limit of around 42K. I applied the same rule to the other shareholder and ensured both do not cross the limit of 42K.
Months passed by, kept informing the accountant of monthly changes to the ‘xls’ and also dividend declaration forms. No issues highlighted. Thought I had managed to extract extra funds in form of tax free dividends from ltd through additional shareholder.
Meanwhile the original accountant moved on and got assigned new accountant and a came along new FY (13-14). Around September 2013 was asked to fill in a form which will be used to calculate personal tax return. Provided my own salary and the dividends figure which I withdrew from the company. After calculation I was informed that I owe HMRC around 2200 GBP – 1100 in tax due for FY 12-13 and as the tax was higher than 1000 I have to pay similar amount as payments on account for FY 13-14.
To my utter disbelief I asked the new accountant of what went wrong; why is there such a high tax due in spite of me not drawing additional funds out of the ltd as I thought that itll incur 25% charges.
I was now informed that every pound dividend drawn from the company after the addition of new shareholder needs to be split 82-18%. I drew around 34K as dividends assuming this plus my salary combined did not breach the 42K limit. The other shareholder drew amount equivalent to 42K minus the salary.
Now I am told that even the 34K taken have to be split by 82-18% rule. Even the dividend withdrew by the other shareholder had to be split.
I knew all along I was following the guidance provided to be by the (ex) accountant till the last word to make sure most tax efficient use of company funds. Still I have to pay 2200 pounds. Not being happy at all I reported the issue to new accountant; made her aware of the history and asked to suggest best course of action. Unfortunately it has been all downhill from that moment on.
After a lot of email exchanges the only suggestion I got was to declare some of the dividends as loan which will bring the tax to < 1000 and remove the need to pay payments on account. I felt I deserve a refund as I've only been following the guidance provided. Getting increasingly frustrated with the way how the situation was handled I had to escalate the matter to higher management. Got some traction to no avail and the situation remains as it is with the accountancy now willing to provide back ‘financial gesture of 3 months accountancy fees’.
Deadline of 31 Jan is imminent and I am still trying to finalize my personal tax return for FY 12-13. The way how I've been treated during this issue has definitely left a gaping hole in my mind with regards to the firm’s way of handling such a trivial matter – shareholder split and how to draw funds in such situation. I am talking about an established firm – winner of many awards year on year - and many of us should be with them. I am contemplating on leaving them as I would not like to find myself in similar situation with another issue.
Has anyone else been affected by shareholder split div. declaration issues before? Or are there others who feel they might be under the same boat? Appreciate any feedback on this matter.
TIA!
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