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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4091
Experience:  FCCA FCMA CGMA ACIS
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Director of Limited company got a partner with 50% shares.

Customer Question

Director of Limited company got a partner with 50% shares. Partner left the company and took all possible shares (based on company profit). Lets say company profit was 100k they hold 50/50 shares. Director who left took 40,000 and produced certificate for both of them. The other director took only 20,000. Is there a way when he can only declare dividend paid not all declared on his tax return?
Submitted: 11 months ago.
Category: Tax
Expert:  bigduckontax replied 11 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

Dividends are payable per share and must be approved by appropriate meetings. What exactly is this 'certificate?' At this stage the whole matter sounds decidedly fishy.

Customer: replied 11 months ago.
its is...I'm a simple bookkeeper this a matter of my friend but his really stuck and ask me for help.He got a company with his friend. They had high profit but very little transaction and they didn't want to use accountant. They use a software which calculate profit for them. Leaving Director was behaving very in-professional. They did held meeting but this was a dispute matter. The one who left wanted all dividend the one who remain didn't but agree just to keep situation calm. The funds are with HMRC (CIS) and he doesn't really want to take his dividend. I know its to late to deffer them but can he still do something to change situation?
Customer: replied 11 months ago.
He want to build his company and dont really want to pay tax now on funds which will just sit on his account. Can he not take them and not pay tax on them if they been issued on dividend voucher?
Expert:  bigduckontax replied 11 months ago.

What are the funds with HMRC (CIS)? This would indicate that an external contractor in the building trade has been involved working for the company. This is becoming more and more complex by the minute.

Customer: replied 11 months ago.
the company does lift installation so the CIS is deducted from them
Customer: replied 11 months ago.
If this is to complicated i understand if you can't answer
Expert:  bigduckontax replied 11 months ago.

This is incorrect, CIS applies only to individuals working in the construction industry. The first thing to do is to go the the company's customers and demand full settlement of invoices. The fact that the customer has placed money with CIS is their their problem to recover.

What is this 'certificate' please?

Customer: replied 11 months ago.
the CIS will be refunded. They did check that CIS also apply to Limited companies therefore deduction. Certificate was a dividend certificate
Expert:  bigduckontax replied 11 months ago.

The dividend is taxable in the leaving director hands less the first 5\k which is tax free. HMRC will have to bill him for the sum involved and you should tip them off to that effect. The remaining shareholder should have been similarly taxed on their 20K. The whole thing is a gigantic mess and all but fraudulent. I would tent to put this whole matter in the hands of a local, trusted solicitor to advise and arrange recovery proceedings. The police are unlikely to be terribly interested in these sorts of shenanigans.

Customer: replied 11 months ago.
I'm not sure if I agree here. Person who contacted me doesn't want to do anything illegal or fraudulent hence the question. Maybe my question wasn't clear and matter is complex but i just wanted to ask if there is anything i can advise in this complex situation in regards ***** ***** due. Does he need to paid tax on whole 40k or can he just pay tax on received 20k. I'm aware about the basic (5k tax free etc) and the other director is aware he need to pay tax on his bit, CIS was deducted correctly as well... There was actually solicitor involved but there is no need for recovery... so this is not the answer I was looking for.
Expert:  bigduckontax replied 11 months ago.

Then you must both settle your liabilities with HMRC and hope that they do not use their usual unhelpful approach to individuals trying to sort out a mess.

Customer: replied 11 months ago.
I agree and this exactly what they want to do the question was how to do it right. I'm not getting answer here
Expert:  bigduckontax replied 11 months ago.

Write to HMRC explaining what has happened and asking for guidance as to how the tax which should have been deducted from the dividends should be settled. You will have to tell that Department your erstwhile partners name and address.