Tax year balls-up

But it is not a matter of a simple piece of paperwork. It is a matter of the decision to declare a dividend having been made at the right time. It clearly was not made at the right time. Let us not pretend that it was!

There is nothing in law that says that to be valid a provision has to be decided upon before the year end date. There is a world of difference between deciding upon the amount of a provision *before signing off the accounts* and pretending that a dividend was declared upon a certain date when it clearly was not.

'Solving' a problem by committing a fraudulent act is not in fact solving anything. It is compounding the problem!

You really do not understand the concept of fraud do you Troy? I hope that you are not a professional accountant for the sake of your clients!

Thank you Tim, I could not have put it better myself. What world do these people live in? They do not realise that by committing fraud, in back-dating documents, they are not only putting their clients at risk but they are also putting themselves, their livelihood and their own profession at risk!

Well that is one of the ways of establishing the date of payment of a dividend. However if that entry on the loan account is in fact back-dated (i.e. it shows a date other than that on which the actual entry is made) then that is not *in fact* the date of the dividend.

The date upon which the journal is written up (not the date entered on the journal) may be the date of the dividend. It all depends upon the FACTS which may, or may not, be correctly evidenced by the paper work. The back-dating of journals may or may not itself have consequences; the journal may simply be recording something that has already happened. The point is that in this instance the dividend had not happened (according to the OP's original wording) but it was being advocated here that documentation should be drawn up to pretend that it had happened. That is the fraudulent act.

jees, you don't harf get up to sum strangley fings in yer barth trolly!!

This is quite an intriguing thread, for (like so many, alas) so much is derived from assumption rather than statements from previous posters.

Although the first reference to "fraud" in this thread was your reply to Shano, you subsequently used the term in reply to me when you said "If you ... gain a tax advantage by making up documentation ... then that is fraud."

I don't recall suggesting "making up documentation". But it is important to understand what documentation is needed, when it is needed, what date it should carry etc.

It seems to me the confusion here arises because some posters have made the assumptions (a) that no dividend was declared before 6th April, and (b) the Company has not taken advantage of the special provisions (ERs etc) available to small Coys to waive formal notice of meetings, skip AGMs, etc.

It may very well be the case that no decision was made before 6/4, but given that the OP had already sought other advice before posting here, it is IMO quite feasible he had decided on or before 5/4 to pay a dividend - albeit he may not have known the correct procedure to follow, having made that decision.

The OP spoke of "wanting to make a payment". Making a payment is not the same as declaring a dividend.

And this is the crux. Declaring a dividend is not something which is done in writing. The declaration is the taking of the decision - either made by the Board or by the Members if recommended by the Board.

He either bathed alone (interim) or with his wife (final). (For pedants, I accept that either can be declared by the Board alone, or by the members)

Assuming it is the Director's decision alone in this case (it has all the appearance of an interim div) no documents need to have been raised before

Other issues are whether sufficient profits were available for distribution (there were), and whether cash was (yet) available to make the payment (dealt with presumably via loan account).

In defence of those whom you accuse of advocating "fraud", (a) I haven't seen a post from any accountant here advocating "fiddling" or backdating documents, such as to commit a fraud, (b) no-one has established that the declaration didn't pre-date 6/4.

A little knowledge is not necessarily a dangerous thing - but knowing that you don't know it all (e.g. understanding the distinction between documention surrounding a dividend and the process of declaring a dividend) has led you to shout foul before examining the replay.

Juts to remind ourselves, the OP said: "I have discovered that this might be tricky: dividends it seems are taxed when the money is paid, not when the dividend is actually dated (which could be back dated)" That's when I started the alarm bells ringing. The OP said nothing about having decided to pay a dividend whilst he was in the bath! Other posters said it was possible to draw up the documentation, as I recall, to show that a dividend had been declared, when it plainly had not!

It is not an assumption that no dividend was declared before 6 April. It is clear from the OP's original posting. NO dividend was declared before 6 April, that much is fact!

It might be *feasible* that he had decided, but the fact is, as shown in his original posting, he had NOT in fact decided to declare a dividend. Why would he be asking about it if he had already decided to declare one? Come on!!

The OP said nothing about any decisions whilst bathing! That concept was introduced by a later poster when hypothesising as to what he

No one is saying that documents did 'need to have been raised', as you put it, before 6 April. However if documents are created which attempt to show that it had been decided to declare a dividend whilst having a meeting in the bath or wherever prior to 6 April, when the fact is that no such decision was made on that earlier date, and those documents are put forward to HMRC in an attempt to gain a tax advantage, HMRC could well view that as fraudulent. There is a distinction there which you are overlooking!

I don't know whether the poster(s) was/were accountants or not, but it was certainly suggested that documentation could be drawn up to show (or pretend) that the dividend had been declared prior to 6 April, when the OP's original posting showed that no such declaration had been made. Just to be clear, we are talking about drawing up documents (whether back-dated or not) which attempt to show that a declaration of dividend had been made on a certain date, when it is obvious that no such declaration had been made.

Martin, I have more than a little knowledge in these matters, so please don't make such assumptions about me. I do understand the processes involved and I also understand how HMRC might react to such a scenario. I am also familiar with people, and it appears you might be one of them, who use a play on words and attempt to confuse the issues to gain some kind of tactical advantage. The facts speak for themselves.

I think the first sentence answers the second sentence question.

"Martin" wrote

Of course.

"Martin" wrote

Whilst true, I don't believe that is the "crux". The crux of the matter is that the OP

I think the biggest clue is in the OP's phrase: "What I would like to do (or to have done already)..."!!

I must say I am very much enjoying this clash between Accountants A and B:

Accountant A works for the Revenue. Since you can get the same advice from the HMRC Help Line it is debatable whether Accountant A is an accountant at all. Using his client's words to crucify them, should ensure that nobody gives him any information in the future, so the resultant accounts will be as wrong as wrong can be. No wonder he has plenty of practice at dealing with an "angry" HMRC!

Accountant B works for his client. His client can be up front with him, because he knows Accountant B will use the information carefully, in a balanced manner. Accountant B wants his client to pay as little tax as possible and will bend any rule to achieve that.

Can you imagine any other profession taking this stance, Tim?

DOCTOR: "When you came in you said you had indigestion. You actually have colonic cancer, but I'm treaing you with Rennies".

LAWYER: "Gentlemen of the jury, I must first of all confirm that my client has admitted to me privately that he has a morbid interest in firearms. However he denies involvement in the shooting..."

Can you imagine any other profession, Tim, where the professional might advise his client to commit a fraudulent act, even though the client may not recognise it as such, but the professional surely should?

I would expect the professional to dig down for the facts. Starting with "When did you decide you wanted to pay a dividend?" That is not the same as assuming such a decision wasn't made until the OP thought "Gosh - how do I pay this if I haven't yet received and cleared a client's cheque?"

At no point has the OP mentioned "declaring" a dividend. It would be unprofessional not to ask if (a) he did so, and (b) when.

As a matter of interest (and, in a sense, to repeat Troy's point of several days ago), what response would you give to a client who says "I paid this dividend to myself last month. Please would you do whatever is necessary to make it legit." If s/he couldn't recall the date and time of the declaration, would you treat the payment as a loan (potentially taxable and reportable to HMRC), a salary (potentially taxable and reportable to HMRC), a dividend (potentially taxable and reportable to HMRC) or theft (not taxable nor reportable to HMRC, but potentially reportable to NCIS).

You will be aware, of course, of how HMRC would treat the payment.

I would go for a dividend. Are you saying the dividend was paid in cash (or goods!)? If not I would have thought there would be evidence of at least the payment date. Paying a dividend would imply that the client decided to pay a dividend.

If the evidence is that the client has colonic cancer why should the doctor take notice of someone who is wrong?

Only communications between clients and lawyers - solicitors and barristers - are subject to legal professional privilege.

You seem to be wanting to ignore the provisions of the Proceeds of Crime Act 2002.

If the client actually did pay the dividend last month then it is already 'legit', it only remains for the dividend to be recorded as such. Presumably the client will have evidence of payment of the dividend in the form of either the cheque paid to himself or a record of the cash outgoing. The client is your best evidence in saying that "I paid this dividend to myself..." assuming that he is a director/shareholder and able to properly declare the dividend. However, I have to repeat, that is *not* what the OP said. He cannot have declared a dividend unknowingly. He should not be persuaded to back-date a dividend and he should not be persuaded to sign paperwork which was created to pretend that a dividend had been declared when the client's own words show that it was not declared. In short, the client should not be lead into creating false evidence.

Correct.

No - I'm simply saying that the OP's silence on the issue of a declaration is not proof that a declaration was not made.

Precisely. Which then brings us to the question of Director's Loan accounts. Almost by definition, these are made up (in the book-keeping sense, not the invention sense!) after the event.

If a div was declared, to be paid on a specified date, but no payment actually happened on that date, then the Director's account would _subsequently_ be adjusted to reflect that.

But note the provision applicable to accountants and their clients vis a vis money laundering, wef 21/2/06

And what evidence would you expect to see to show that the payment was a dividend?

Recorded how? Do you mean minuting the declaration?

Or an entry in the D's current / loan account.

Precisely.

We all know that. He didn't even mention the word "declare".

Who says?

Agreed.

He has not said that. His post was silent on the subject of declaring a dividend. He was asking about _paying_ it. You're treating as fact things which haven't been said. Note that in his post the OP was assuming the payment date was critical. He appears not to have understood the significance of a declaration nor the funciton of a Director's Loan / Current account.

No quarrel with that (except you meant "led"). The point is that a professional should check out the facts thoroughly. There is nothing in the OP which conflicts with the notion that the Director decided to pay a dividend, got pre-occupied for a few days, then puzzled about "what am I going to pay the div with?". It may not be what happened, and prima facie it wasn't. But it could have been.