Wife has asked Revenue dumb question and left her name!

[Arab]

I love her dearly (really!) but the Mrs has possibly landed me in it, so would appreciate your thoughts:

Basically she was trying to suss out how much dividend we might take out of the business before end tax year and was confused about tax liability. Accountant on holiday, I was out of the country....result, she phoned HMRC and gave her surname (that's all, but its a very unusual name). Her question led to a discussion in which she uttered the phrase that made my blood run cold when she related to me "so it would be better if we took out as little as possible before year end so as to avoid paying too much tax?". Yep, she asked a taxman this.

Short of divorcing the dizzy woman, what do you reckon? Investigation likely?

[administrator]

Hi Arab,

Welcome to the forum. I have a fear of calling HMRC too and it is very easy to be caught off guard with them! I don't think you have too much to worry about though as what you should be taking out of the business is a salary and then dividends. Salary comes out of the pre-tax profits of the company, expenses are removed and then the left-over has corpration tax applied - the rest is profit that is distributable by the shareholders. So it doesn't matter what you take or when you take it as long as you have enough to settle your corporation tax liabilities.

So now, I wouldn't now be fearing an investigation but for your peace of mind I would make sure I have investigation insurance so that should the tax man ever come knocking, you have insurance to cover the accountants' fees that can rack up during these exercises.

Kind Regards

Admin

[captainham]

I doubt that HMRC is joined up enough for a call like that to lead to anything. I would imagine that the person she spoke to was a lower-level employee who is just there to answer questions as opposed to a crack tax investigator who is now bugging your phone lines and the like.

As Admin says, a spot of insurance can go a long way, for peace of mind if nothing else.

[Sally@InTouch]

I love her dearly (really!) but the Mrs has possibly landed me in it, so would appreciate your thoughts:

Basically she was trying to suss out how much dividend we might take out of the business before end tax year and was confused about tax liability. Accountant on holiday, I was out of the country....result, she phoned HMRC and gave her surname (that's all, but its a very unusual name). Her question led to a discussion in which she uttered the phrase that made my blood run cold when she related to me "so it would be better if we took out as little as possible before year end so as to avoid paying too much tax?". Yep, she asked a taxman this.

Short of divorcing the dizzy woman, what do you reckon? Investigation likely?

Chill! It's good tax planning, nothing more, nothing less!

[BlasterBates]

The last place HMRC puts investigators is on it's enquiry desk. I think they assume that the last place a tax evader is going to call is HMRC. No the advisor isn't going to now scour the records to find out who called, he's too busy answering the next call.

[mudskipper]

What did the advisor answer in response to her question?

[Ignis Fatuus]

Contrary to what we all believe, the people at HMRC are not all mad keen to ensure that you pay the maximum tax possible, as if your loss were their personal gain. What they are keen on is your being truthful and following the rules. IME if that leads to lower tax receipts for them, they are relaxed about that.

So asking them how to reduce your tax liability is a legitimate question. There is a fine line between that and dropping a hint that you might be devious about it. But being open about wanting to minimise tax is OK.

[BrilloPad]

If HMRC investigated everyone who tried to pay the minimum of tax then they would be investigating everyone. Except me.

[Nathan SJD Accountancy]

Chill! It's good tax planning, nothing more, nothing less!

WSS.

I am also wondering what the response was from the HMRC officer.

[psychocandy]

For a start, can't really see HMRC having a database where they flag everyone who phones up and asks a stupid question. After all, do you seriously think they'd cross reference surnames against every phone call? Probably be no chance in 90% of the cases anyway.

Also, I don't see what she did wrong. Perfectly legal to pay yourself as little or as much dividends as your company decides in a tax year. No requirement to pay it all out or even worry about not doing so. None of HMRCs business in how your business intends to run itself.

But, perfectly legit for your mrs to seek clarification on a personal taxation issue. Simple question - if dividends take me over x amount, will I pay more tax? Nothing secret about that and I dont see why HMRC would bat an eyelid.....