Declaring Dividends

[Bertie Bassett]

Hi there. Im in a right mess and in need of some advice please.

I was declared personally bankrupt in December 2009 and am undischarged for approx 60K. My own business ceased trading and couldnt pay its debts - approx 12k also - awaiting to be formally wound up because I cant afford to do it.
My books for that company showed that I was paid dividends of 30k and 36k in tax year 09-10 - it was basically to write off my directors loan which had basically kept me living for the previous 2 years. It wasnt a cash lump sum.

My problem now revolves around working tax credits and my tax return.

I didnt get a P45 - I am currently unemployed (on JSA) but my partner is working and we barely survive on what we get. The way the Tax credit systems work is they take your previous tax years earnings when working out payments for the present year - so allowances for apr 10 to apr 11 is based on what I 'earned' during 09-10 - strange - but true!!!

Suddenly I have a massive dilemma - if I declare my dividends that i 'received' during last tax year my so called earnings will be way above the threshold and we will get zero - plus they will probably try and claim money overpaid back for 09-10 in their opinion.

My earnings as on my final wage slip were 4k for last year.
Do I just declare that and hope for the best or put down the dividends also???
Are dividends traceable even though the Company is wound up?

Im not advocating anything illegal - im just in such a mess and having being financially ruined once and left with very little - we just face a massive struggle. I need to protect my partners position also and she is unaware of this dilemma at present.

Any help/comments/advice - will be truly appreciated.
Thanks

Bertie

[dp0848]

It's a while since I've looked a a tax credit form but I seem to recall that investment income of more that £300 per annum has to be declare. The dividends that you took from you company, even though not as cash, would be classed as investment income. Therefore they will need to go down on the form.

David.

[Jenni384]

Bertie,

Firstly don't panic.
David's right - you do have to declare the dividends (after the first £300). Remember to declare them gross, not net (dividends are received net of a 10% tax credit, so for every 9k you received, you declare 10k).

However - if your income for this year is going to be lower than last year - you can tell them and they will adjust your tax credit claim accordingly.
The only problem with this is, if your income for the year goes over what you've predicted, they will ask for some money back.

EG last year's income 30k
This year's income estimated at £10k
Tax credits paid based on 10k.
Actual income £12k
They will claw back tax credits, being the difference in the entitlement to them between £10k and £12k.

As soon as you know your income will increase, tell them immediately.

In terms of the 09-10 tax year, you do need to tell them your income. Increases of 25k on the previous year will result in no adjustment.
(e.g. 0809 income 20k, 0910 income 44k, tax credits still payable for 0910 based on 20k).

Overpayments can be repaid at no interest over 12 months.

I'm assuming it's your partner who's claiming WTC as you're on JSA.

Hope all that helps, good luck getting into a better situation

Jenni

[Jaykay]

I agree with Jenni384 over your current year WFTC. If your income has reduced, you can amend your claim to show the true level of income.

I am no expert on bankruptcy and I know there are some exceptions but it occurs to me that if you were bankrupted in November 2009, they can only claw back the overpayment from then on in?

You may not have to pay them back for the whole year. Worth checking up on before just giving them the figures.

[Chris Ashdown]

As dividends are paid out of profit, I assume the liquidator will claim they were not legal in that there was no profit for them to be paid out of and claim the money back from you

May well be talking rubbish, but unless you can prove you had the profit at the time you paid the dividend, then you could be in the ****

[Bertie Bassett]

Just wanted to thank David, Jenni, JayKay and Chris for your comments.
Many thanks for taking the time and trouble to respond.
I think I get most of it - not necessarily what I wanted to hear but so be it!

Bertie

[mapiman]

If you were paid dividends were these "final" or "interim". If final why did the company later run out of cash? No good explanation could lead to a reclaim. If "interim" there will be a reclaim. Might also be criminal problems.

[Bertie Bassett]

they were final. Company ran out of cash owing to a defaulting creditor which forced me under.