Salary or dividend?

[gwhat]

I have recently received the "books" of a new client company which started trading in April 2004 and ceased to trade at the end of May 2005. I have extended the year end and am producing one set of accounts before applying for striking off.

The company offered additional income and was operated on a part time basis. All profits have been withdrawn from the company throughout the life of the company as it has operated without a bank account. The profits amount to less than £2,000. My view is that as the accounts have not yet been finalised and agreed the withdrawal connot be treated as a dividend distribution, but should instead be treated as wages to the sole employee who is also a director and owns 100% of the shares. As such income tax would be payable by 31st Jan rather than Corp Tax by the due date by means of the Non Corporate Distribution regulations.

Would be grateful if anyone could confirm this treatment or suggest an alternative?

[Simon Sweetman]

You could now vote a bonus to the director and credit it against his loan account to clear the matter : that of course need to be taxed under PAYE and strictly should have been taxed when the money was taken.