working tax credit / dividends

[twix]

Hi
Quick questions...
we run a ltd company, and this year have spent lots of money on getting tooling made, therefore we havn't had any dividends from the company.

we have been living on £750 per month.

we recently found out (through posts on here) that we should have claimed the working tax credit etc last year when we knew that our income was going to be so low, instead of taking our accountants advice and waiting until the end of the year (today) to get our earnings.

we applied and will get full tax credits as from now....

questions are.

the coming year we will have a large income, because of the investment.
I vaugly understand that our income musn't rise by £25k therefore are we allowed to keep the money in the company and take lower didvidends - next accounting year.

from what I read if our income changes next year we should inform hmrc and they will change our benefits, which seems unfair, as they awarded us the payment on this years figures. Therefore we need to keep our income low.

Is there a problem with this, are we allowed to not take dividends, and let the money roll over into another year just to pick up the benefits.
as Ive paid £12k at xmas in corperation tax and always worked, I think its about time I got something back.

Advice please

[Ray Coman]

Your tax credits claim is based on your income for the preceding tax year. This is unless you make a protective claim, where it is based on your current year income. You are correct in thinking that it will be based on current year if your income increases by more than £25,000. This anomaly does provide opportunities for tax planning, by alternating high and low income in successive years and making normal/ protective claims accordingly although I'm sure that this is not in the spirit of the system. It is doubly confusing as the tax credits are based on your current circumstances although by default on your prior year income.