Unpaid dividends

[Sl1985]

Hello ladies,

Just after some advice on what I can do regarding unpaid dividends.

My father has a company of which I have been a shareholder of for nearly 10 years. Just abit of backgrounders info - I was young when I signed as shareholder and didn’t (and still don’t) understand much about companies. I was forced to sign (dad was violent towards mum who was still married to him at the time. If we didn’t do what he said, he often took it out on our mum so we were always very compliant). The reason he made us shareholders was to reduce the amount of tax he would have to pay. We never received the dividends even though it was written in the reports that it was given, this was fine as I never wanted his money anyway. He would however pay the tax each year for us as understandably it isn’t fair for us to pay tax on something we never actually received.

This month he closed the company, however his accountant filled out a tax self assessment form for me which states how much dividends I “received” for 2017-18 and the tax which is payable for it in January 2019. I asked him for a cheque for this tax as I don’t know where he will be in January and he has basically said he’s not paying the tax due even though I never received the dividend! (I know- great dad right!)

I’m just wondering what my rights are here? I don’t want the dividend (which this year was about £40,000), I just want the money for the tax (which is about £11.000) as I cannot afford to pay this and I know the HMRC can add interest to unpaid tax.

What can I do? Would I have a case legally to get this back from him? There are about 10 years worth of unpaid dividends here

Thanks and I hope this query made sense!

Her shares may have received the dividends but the funds were not allocated to an account in the owners name. So again, I would challenge the receipt of the dividend.

However that's a matter for the OP and her solicitor to pursue. HMRC aren't going to care. As far as they are concerned the tax is due.

I'd submit the tax return showing zero dividends which is true, she received zero dividends. If HMRC want to pursue it, then let them know the full situation. Any repercussions will be against father not the OP.

I am slightly confused that the accountant has done your tax return and filed it. Did you give him your P60 etc - otherwise how can he do your tax return? Have you actually authorised him to do this? Have you had the tax returns previously to check them? My accountant sends me the returns in draft form to agree.
I would be demanding the £40K
If he has been claiming you have received this sort of money regularly - have you/he been paying higher rate tax on it?
I think you need to see an accountant or a solicitor for advice, but it may stir up a hornet's nest. Do you have siblings in the same position? It may help if you do and all have the same problem.

Any repercussions will be against father not the OP.

No, the OP will be saying she has not received any dividends but her previous tax returns (which she has approved) say that she has and the company accounts say that she has. So as far as HMRC are concerned she has had the money.

It's for her to sort it out and show that she hasn't received them. This is likely to require either her father to cooperate or legal action. In the meantime HMRC will want their money.

Have you given the accountant the right to file a tax return on your behalf? How can he do that if not?

I suspect the inflated tax amount is the amount due for last year and then payment due on account for next year - as dividends are not taxed at source like PAYE you often have to pay your tax upfront (two payments - one in jan and one in July). The accountant can ask to reduce these to £0 if needed as you no longer have the dividends.

Which makes me think that maybe your father if he has been paying the tax has also been paying the payments on account too for the following year so he is refusing because he thinks he already has ‘paid’ the tax on this dividend? But maybe the payments didn’t the full amount for the last £40k and then the remaining being asked for is actually not due anyway....

You need to speak to the accountant.

1. Get a copy of your last 6 tax returns from your accountant so that you have certainty about what they show

1. Ask your accountant for a copy of the FULL tax calculation for the latest return. Most software can produce this at the touch of a button.

1. Phone a few local high street accountants and explain that you want a tax return to be checked and how much would it be?

1. Make the appointment and follow it up.

1. Stop panicking - You have plenty of time to send in an amended return.