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Where Taxpayers and Advisers Meet

Dividend timing - o/d DCA

Joined:Wed Aug 06, 2008 3:42 pm
Dividend timing - o/d DCA

Postby Alcosaint » Wed May 02, 2012 1:16 pm

Good day..

Possibly being too cautious, but here's the scenario: Client was an employee of 2 different companies in 11/12. Pay from Company A meant client was subject to HRT (40%), until leaving that employment late in 11/12 - no new employment has been found or is being sought, except as below.

Company B, unlike Company A, is controlled by my client. During 11/12 my client withdrew funds from Company B, to the extent that client had an overdrawn loan account at 5/4/12 - c£20k due to 1 large withdrawal. Having drafted Company B's 11/12 accounts it is clear that a dividend could now be declared to reverse the o/d loan account balance.

From an Income tax angle it clearly suits to declare the Company B dividend in 12/13 (treating the £20k as a loan until cleared by dividend) - PA and basic rate band already fully utilised in 11/12 through pay from Company A.

My question is this - does HMRC have any powers allowing it to treat the 11/12 withdrawal as anything other than a loan? And has anyone had experience of this actually happening?

section 44
Joined:Thu Oct 30, 2008 12:47 pm

Re: Dividend timing - o/d DCA

Postby section 44 » Thu May 03, 2012 10:34 pm

I don't see how HMRC could deem a dividend to have been declared.

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