Retrospectively declare income?

[rotor]

Hello there!

Background:

I am a contractor operating through my own limited company.
In the past three years, I gave myself the following income (through salary + dividends):
2012-13 ~£100k (~13k SA tax due)
2011-12 ~£42k (~£0 SA tax due)
2010-11 ~£44k (~£0 SA tax due)

The reason I only took out £44k and £42k was because at the time I didn't need any more money personally, not realising the implication of the £100k threshold (losing the allowance at a 2:1 ratio). Now I'm faced with wanting to withdraw the savings I allowed to accumulate in the company, but for every £1 over £100k I withdraw, I end up paying almost 50p in tax.

Is there any way to go back to 2010/2011 and declare a greater dividend? This would require new company accounts and new SA returns, probably annoying a lot of people in the process, in particular HMRC, but also companies house, and my accountants.

Is there any other way I can rescue this money that I stupidly allowed to stay in the company?

Thanks for any ideas you might have.

[ASB]

Carry back pension is about all you can do. Unless you want to commit a few criminal expenses, which you accountant would need to be complicit in.

[TheCyclingProgrammer]

No you can't retrospectively declare dividends. No doubt people do it and you'd probably get away with it if it was recent (e.g. declaring a dividend for the end of the previous tax year a few weeks late which is then shown as credited to your director's loan account) but going back three years? No chance.

I'm amazed you're even asking...just think about what you're saying and the implications. Not only is it fraudulent, it would require your previous accounts to be amended, your SA to be amended etc. You'd have HMRC sniffing all over you and if your accountant is reputable they wouldn't even entertain the idea.

Allowing the profit to build up in the company in the first two years wasn't stupid anyway...you can't predict the future and it's sensible to have a war chest. Your war chest doesn't have to stay in your business account but it allows you to build it up without paying higher rate tax and would have allowed you to keep taking dividends if you had no new work.

Unless you have an immediate financial need for the money, you should just continue to draw dividends each tax year up to the £100k limit until you've taken all the profit or got it down to a buffer you're happy with. You have other options too, like pension contributions. You should talk to your accountant and ask them what's best for you.

[rotor]

Oh, definitely not interested in anything fraudulent, goodness no. I sort of knew this would be the answer, but unfortunately I do need the money, as I want to buy a house. =(

[northernladuk]

You could of course liquidate the company and use some tax advantages to get some of it out a bit cheaper but you will need a valid reason to do this. Just shutting it down to get the money and restarting it is obviously aggressive avoidance and will get caught by bed and breakfasting rules.

[BrilloPad]

Retrospection is only for HMRC - see the s58 thread.

[TheCyclingProgrammer]

Just shutting it down to get the money and restarting it is obviously aggressive avoidance and will get caught by bed and breakfasting rules.

I think you meant Transactions in Security rules, but it is Friday night I guess...

[Wanderer]

You could of course liquidate the company and use some tax advantages to get some of it out a bit cheaper

That's probably the best option. Do a search for Members Voluntary Liquidation or google for site:contractoruk.com MVL

As northernladuk points out, it's probably only a viable option if you are ceasing trading so get some professional advice...

[rotor]

Thanks everyone for the replies. It is as I suspected, no easy answer.

I agree that there is no way of predicting the future in terms of deciding how much to withdraw from the company. But for me, what this boiled down to was not having that crystal clear understanding about the 100k limit, that is, that anything over 100K is taxed insanely high and only worth withdrawing under extreme emergency.