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Heads Up: New Reporting Requirements for Dividend Data

Written by admin on . Posted in Company Director, Corporation Tax, Director Disqualification, Dividends, self-assessment. No Comments on Heads Up: New Reporting Requirements for Dividend Data

Starting with the 2025/26 tax year, directors of close companies (owner-managed companies) will need to separate the dividend income received from their companies. This change will have an impact on almost 900,000 directors.

In very broad terms, a close company is a company that is under the control of its directors or five or fewer shareholders.

At present, directors report just the total dividend income figure, which means HMRC can’t tell which dividends a director receives from their own company or from other sources. By separating out dividends, HMRC will be able to see the total remuneration package received by an owner-manager. This helps them to focus their compliance activities.

Disclosure

From 6 April 2025, directors of close companies will have to disclose:

  • name of the company and its registration number;
  • percentage shareholding in the company; and
  • amount of dividend income received from the company for the tax year.

The question on the tax return about whether an individual is a director of a close company will be changed from voluntary to mandatory.

In regard to the percentage shareholding, this will be the highest percentage held during the tax year. For some directors, providing this information will not be straightforward; for example, where a company has different classes of share.

Employee hours data

On a more positive note, the proposal that employers would have to report the actual hours worked by each employee has been shelved. The implementation date had already been put back from April 2025 to April 2026.

The Government has recognised that requesting this information as part of the real-time reporting process would have been unduly complex, costly and burdensome for businesses. The cost of the initial implementation alone was forecast to be nearly £60 million.

The starting point for determining whether a company is ‘close’ or not can be found here.

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HMRC and Time to Pay Arrangements: What You Need to Know

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HMRC and Time to Pay Arrangements: What You Need to Know

When facing financial difficulties, paying taxes on time can be a challenge for individuals, partnerships, and companies alike. On a discretionary basis, His Majesty’s Revenue and Customs (HMRC) may be willing to offer a  Time to Pay Arrangement (TTP); a flexible solution that allows taxpayers to spread the cost of their tax debts over an extended period. These arrangements are typically agreed upon if HMRC is satisfied that the taxpayer is genuinely unable to pay the full amount immediately but can settle the debt in instalments.

Why Time to Pay Arrangements Are Useful

A TTP agreement helps alleviate the immediate pressure of a tax bill and avoids severe enforcement actions like penalties or interest charges, which could further strain finances. Whether it’s personal income tax, VAT, PAYE, or Corporation Tax, these arrangements offer breathing space for managing cash flow while staying compliant with your tax obligations. HMRC generally expects businesses or individuals to proactively engage with them before defaulting, and they usually respond positively to reasonable requests for payment plans.

Pitfalls of Not Keeping to the Agreement

Failing to adhere to the terms of a TTP arrangement can have serious consequences. If payments are missed, or HMRC believes the business is no longer able to meet the terms, the arrangement can be terminated. HMRC will then escalate recovery measures, which may include legal proceedings.

HMRC’s Escalation Procedures

Once a taxpayer defaults, HMRC will typically send reminders, followed by more formal actions if the debt remains unpaid. This can include:

  • Issuing a statutory demand: A formal request for payment within 21 days.
  • Commencing legal proceedings: HMRC may seek a court judgment for the debt, which could lead to seizure of assets or garnishing of income.
  • Winding up petitions: For companies, failure to resolve tax debts may result in HMRC applying to the court to wind up the business, forcing it into liquidation.

Avoiding Legal Action

It’s crucial to negotiate with HMRC if you foresee any problems with adhering to your TTP agreement. Having professional assistance ensures you make a reasonable case to HMRC and avoid unnecessary legal complications.

Whether you’re an individual, partnership, or limited company, we can help with finding a resolution to your tax debt issues and assist with negotiating a Time to Pay Arrangement with HMRC. For expert advice and assistance, contact Femi Ogunshakin on 07867 795 439 or via email at either femi@femiogunshakin.com or femi.ogunshakin@nexa.law

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The increasing cost of incorporating a company

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Perhaps not as widely known as the much publicised changes to company law is the fact that due to an increase in charges levied by Companies House, fees associated with incorporating and maintaining a company will rise from 1 May 2024.

Companies House has explained that fees are set on a cost recovery basis – meaning that the increases are intended to solely cover the cost of the services they deliver without making a profit.

Incorporation

Currently, the cost of registering a company with Companies House ranges from £10 to £40, depending on the channel used ie postal or online application. with fees increasing across-the-board from registration to exit, The increase in costs will include the following fees:

  • Online registration for a business or limited liability partnership: this is normally completed within 24 hours at the cost of £12. However, online registration fees will rise to £50, an uplift of 300%.
  • Same-day incorporation: the fee for this service is going up from £30 to £78.
  • Voluntary striking off: When a company is no longer required, voluntary striking off will now incur a fee of £33; it is currently £8.
  • Overseas entities: the largest increases apply to overseas entities who need to register with Companies House. The registration fee goes up from £100 to £234, with the removal fee increasing to £706 from £400.

Many people set up a new company through a company formation agent. Their most basic offerings only add a small margin to the Companies House charge. This means the fees charged by agents are going to see similar increases come 1 May.

Confirmation statements

Every company, including dormant companies, must file a confirmation statement at least once a year. The cost is currently £13 and rising to £34. This fee, at least, covers a 12-month period. It’s paid with the first filing during the period with no further charge for any subsequent filings during the same period.

For a full list of Companies House’s current fees visit the government website and for an update on price increases.

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Company insolvencies on an upward trend

Written by admin on . Posted in Bankruptcy, Director Disqualification, Insolvency, Litigation & Dispute Resolution, Restructuring & Insolvency. No Comments on Company insolvencies on an upward trend

Although showing a slight improvement from March, the number of company insolvencies in April of this year was more than double the number from April 2021. This shows just how important it is to get advice sooner rather than later if your company is experiencing problems.

The majority of insolvencies were creditors’ voluntary liquidations (CVLs):

  Total insolvencies CVLs
April 2019 1,429 1,024
April 2020 1,199    933
April 2021    925    815
April 2022 1,991 1,777

Figures already available for May show no improvement. The government’s support measures kept insolvencies at bay during the Covid-19 pandemic, but the expected post-pandemic boom has not materialised for many businesses, followed instead by other damaging economic factors such as high inflation, the Ukraine war and supply chain challenges due to continuing Chinese lockdowns.

The insolvency figures suggest many directors lack confidence in their company’s ability to continue trading in the current climate possibly pre-empting later forced closure by bringing forward a difficult decision. Directors who have any doubts about their business are advised to seek advice as soon as possible. There are two tests which can act as a warning sign of insolvency:

  • Cash flow test: Signs that a company is failing this test include late payment of suppliers and falling behind with payments to HMRC.
  • Balance sheet test: Where a company’s liabilities exceed the value of its assets.

For small businesses and the self-employed, free advice can be obtained from the Business Debtline charity.

Avoiding insolvency

Two recently introduced measures might help a company avoid formal insolvency procedures.

  • A moratorium period gives a struggling business a formal breathing space from creditors to explore rescue and restructuring options.
  • A new type of restructuring plan can be implemented even if certain classes of creditors vote against it.

Guidance on tell-tale signs of potential insolvency, and how managing an insolvent company incorrectly can lead to personal liability and/or being disqualified as a director, can be found here.

Please get in touch with us sooner rather than later if you believe you may need help.

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Debt evading directors face new Insolvency Service powers

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Directors who abuse the company dissolution process in order to evade debts, including the repayment of government-backed Covid-19 business loans, will be subject to stronger powers given to the Insolvency Service.

These new powers were included in the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act enacted on 15 December last year. Previously, the Insolvency Service could only investigate directors of companies entering insolvency but can now also look at directors of dissolved companies.

Phoenixism

Complaints regarding dissolved companies often relate to new companies that have taken over the business of the dissolved company. The new company will invariably have the same directors, take over assets – such as vehicles – but with creditors left unpaid. In some cases, this happens multiple times.

Sanctions

If misconduct is found, a director of a dissolved company can be disqualified as a company director for up to 15 years. In more serious cases, the director could be prosecuted.

It is also possible for a court order to be made requiring a former director of a dissolved company, who has been disqualified, to pay compensation to creditors who have lost out due to their fraudulent behaviour. This aspect applies retrospectively, so former directors can be held liable to creditors despite the fraudulent conduct taking place prior to the Act’s commencement.

Business rates

Along with the changes aimed at former directors, the Act has a business rates aspect. The Act makes it clear that Covid-related changes cannot be used as grounds for a business rates appeal on the basis of “material change of circumstances”.

Businesses that have seen their operations severely curtailed as a result of Covid-19 restrictions will likely be disapproving of this response; they are expected to keep paying business rates on the basis of rateable values set in a different world before the current Coronavirus pandemic.

The only consolation is the £1.5 billion provided for business rates relief to sectors that have suffered the most economically but are not eligible for existing support.

The government’s original press release for the Bill and more detailed information can be found here.

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