Reducing Payment on account for large dividend

[heyya99]

I wouldnt be looking at tax liability money as 'spare' money IMO.

This is for the house again is it?

It's money in my business to cover tax, expenses etc. I have 170 in my business. I want to take 125k out. It'll leave 45 to cover next year's cost of living, plus I have just sign a new 6 month extension.

Yes it it.

[northernladuk]

So where is your CT and VAT money in those numbers?

[heyya99]

So where is your CT and VAT money in those numbers?

I have 14k coming into my business each month to cover those. So the 40 left will be for living off in tax year 16/17 and the incoming 14ks will cover business expenses, CT and VAT.

[WordIsBond]

This is for the house again is it?

In that case, the pension approach JB mentioned isn't in the picture.

Has your corporation tax from your last completed tax year been paid, and if not, how much was it? If you don't retain enough to cover tax liabilities already incurred (CT for your prior year plus CT for the current year to date, plus any VAT due on revenue to date), you've paid an illegal dividend.

[heyya99]

In that case, the pension approach JB mentioned isn't in the picture.

Has your corporation tax from your last completed tax year been paid, and if not, how much was it? If you don't retain enough to cover tax liabilities already incurred (CT for your prior year plus CT for the current year to date, plus any VAT due on revenue to date), you've paid an illegal dividend.

Yes, I paid my 25k CT mid-February. All my VAT is up-to-date.

According to my SJD spreadsheet, my next CT is 6k so far and I have a max remaining dividend estimate of 172k.

[pr1]

A dividend is effectively paid once the money is at your disposal, i.e. once it has been declared and credited to your director's loan account. There's no need for the payment to have left your company account, only for the paperwork to show the date it's due to be paid, at which point it is credited to your director's loan account. You'll then forward this paperwork to your accountant, so there will be no question about acting retrospectively (which, obviously, should not be done).

Is that right? Your personal income is based on when money goes into the directors loan account of a company? In that case someone who was a director of multiple companies might unknowingly owe £££££s on a tax return having never seen the money personally?

I thought it was when it physically arrives in your personal account - as a friend got stung with this last year when he paid himself the "first dividend of the year" in the first week of April - which meant he'd taken 5 quarterly payments in one tax year

edit: what if it was a declared dividend to a non-director (i.e. regular shareholder) - where does the money sit in the interim in that case?

[northernladuk]

Is that right? Your personal income is based on when money goes into the directors loan account of a company? In that case someone who was a director of multiple companies might unknowingly owe £££££s on a tax return having never seen the money personally?

But then you could argue he's not doing his job properly as he should be voting on the share distributions and managing the DL account.

[quote ]
I thought it was when it physically arrives in your personal account - as a friend got stung with this last year when he paid himself the "first dividend of the year" in the first week of April - which meant he'd taken 5 quarterly payments in one tax year

edit: what if it was a declared dividend to a non-director (i.e. regular shareholder) - where does the money sit in the interim in that case?[/QUOTE]

Nope. The debt is created once the voting has been done and then dividend voucher has been agreed. He has effectively been paid it, it's just moved to the DL. Normal share holders don't have access to the DL so it's not an option for them.

[pr1]

But then you could argue he's not doing his job properly as he should be voting on the share distributions and managing the DL account.

I thought it was when it physically arrives in your personal account - as a friend got stung with this last year when he paid himself the "first dividend of the year" in the first week of April - which meant he'd taken 5 quarterly payments in one tax year

edit: what if it was a declared dividend to a non-director (i.e. regular shareholder) - where does the money sit in the interim in that case?

Nope. The debt is created once the voting has been done and then dividend voucher has been agreed. He has effectively been paid it, it's just moved to the DL. Normal share holders don't have access to the DL so it's not an option for them.

Ok so directors meet and declare a dividend on 31st march 2016 - ShareholderA (a non-director) is owed £50k as per his shareholdings - they pass it over to the accounts team to set up the payments (who are slow and take until 10th april to pay it)

ShareholderA fills in his tax return on the 8th of april and doesn't declare the 50k, because he didn't know anything about it

Has ShareholderA done anything wrong by omitting it from his 2015/16 tax return?

this is why I thought it is based on when the payment is received personally, not when it was declared - otherwise the above situation can occur?

[northernladuk]

You are making this up. No one does their tax returns on the 8th if April and is part of the reason you have so long to get them in. You are just putting hypothetical unreal situations in here. Big companies do not issue shares the day before the new tax year either. There is a big difference between the way big companies and small tax dodging contractors work.

I assume reading all this you just let your accountant deal with all this and just tick the box when they say?

[pr1]

You are making this up. No one does their tax returns on the 8th if April and is part of the reason you have so long to get them in. You are just putting hypothetical unreal situations in here. Big companies do not issue shares the day before the new tax year either. There is a big difference between the way big companies and small tax dodging contractors work.

I assume reading all this you just let your accountant deal with all this and just tick the box when they say?

just trying to gather the necessary to mock my friend if it turns out he didn't have to pay a chunk load more tax than he wanted to last year (he was under the impression there was nothing he could do about it and just took the hit)