corporation tax

zygurat789

OP did your husband have a current account with the company and was this current account overdrawn when he left. If that is the situation then the company has to pay tax on the overdrawn amount, this maybe what the remaining director is refering to.

holly_hobby

zygurat789 wrote: »

OP did your husband have a current account with the company and was this current account overdrawn when he left. If that is the situation then the company has to pay tax on the overdrawn amount, this maybe what the remaining director is refering to.

Yep, this would also be the case if as I said earlier, he took dividends (which are paid from post tax operating profit), but the div payment was made without provision for tax.

If so, IMHO (and Im not a corporation tax expert), any such payment would effectrively be classed as a director loan, and whilst your partner isn't personally liable for any CT, the Firm is, to whom your partner will instead owe the capital disucssed (ie as a result of any loan arrangement ).

So although his ex-colleague may have his wires crossed re pursing hubby for CT, the firm may instead choose to puruse hubby for any os director debt (which may enable the firm to meet their CT liability).

As I say I'm not a corporation tax expert or accountant, in any event its always wise to independtly verify forum info directly with HMRC or your personal tax practitioner .

Hope this helps

H x

zygurat789

holly_hobby wrote: »

Yep, this would also be the case if as I said earlier, he took dividends (which are paid from post tax operating profit), but the div payment was made without provision for tax.

I don't understand what you mean.

chrismac1

We're talking here about a director who left 8 months ago. If the other directors have taken 8 months to contact him, in my view that is at least 6 months too long. So if I was your husband, my letter would go:

"Dear former colleagues,

Kindly have sex and travel.

Yours sincerely,

I M Notamug."

holly_hobby

zygurat789 wrote: »

I don't understand what you mean.

Divs were distributed from pre-tax profit.

zygurat789

holly_hobby wrote: »

Divs were distributed from pre-tax profit.

On every P&L I've seen divs come out of post tax profits

holly_hobby

Thats the whole point I'm making Z., divs are ONLY to be distrubited from post tax profit (ie - after the firm has made provision for paying HMRC) - but whether that was the case here remains to be confirmed.

Obv we don't yet know the basis of the partners CT claim (as the OP hasn't confirrmed) ... but IF its due to divs being paid pre tax provision (as above), then the payment will essentially be classed as a directors loan.


Hope this helps

Holly

antrobus

zygurat789 wrote: »

But during most of his period there was no Corporation Tax.

CT was introduced by the FA 1965. But before that companies paid income tax on their profits. Companies have always been separate legal entities and have always paid tax on their profits.

Mary_Hartnell wrote: »

Here is someone else who failed to get his head round the concept of the directors not being a personification of the company.

http://en.wikipedia.org/wiki/Joseph_Kagan,_Baron_Kagan

That Mr Maxwell would be a more contemporary example. But there are dozens more.

antrobus

holly_hobby wrote: »

Thats the whole point I'm making Z., divs are ONLY to be distrubited from post tax profit (ie - after the firm has made provision for paying HMRC) - but whether that was the case here remains to be confirmed.

Obv we don't yet know the basis of the partners CT claim (as the OP hasn't confirrmed) ... but IF its due to divs being paid pre tax provision (as above), then the payment will essentially be classed as a directors loan.


Hope this helps

Holly

Yes. It should be clear that the ex-director has no liability to pay any share of the CT bill by virtue of once having been a director.

Whether or not the company has any claim against the ex-director would depend on the details of the settlement made (if any) on their departure. Which would be more of a legal question than a tax question.

zygurat789

holly_hobby wrote: »

Thats the whole point I'm making Z., divs are ONLY to be distrubited from post tax profit (ie - after the firm has made provision for paying HMRC) - but whether that was the case here remains to be confirmed.

Obv we don't yet know the basis of the partners CT claim (as the OP hasn't confirrmed) ... but IF its due to divs being paid pre tax provision (as above), then the payment will essentially be classed as a directors loan.


Hope this helps

Holly

Divs are not and never have been paid out of pre-tax profits. Do you mean "dividends paid are in excess of post tax profits and reserves"

Lets face it the directors of a company the OP's OH was once a director of have asked him to pay some Corporation Tax aparently on the grounds that he was a director during the relevant period.
We are all agreed that this is a try on and no paynent should be made.
We are now surmising as to any vaguely justifiable reasons as to why they should make such a demand, all of which are pure speculation
I would doubt that any dividends have been paid because these are generally arruived at after the a/cs have been prepared and they are then used to reduce the directors overdrawn loan accounts.
To say dividends have been paid out of pre-tax profits is about as sensible as saying they have been paid out of sales proceeds.