Applications to the Time To Pay scheme made by companies who pay dividends as part of remuneration are being refused by HM Revenue & Customs. The Time To Pay scheme was introduced to allow businesses extra time to pay their tax bills during the recession. It is rare for HMRC to refuse a first time application, and accepts approximately 95 percent of applications from businesses experiencing cash flow difficulties.
However, it would appear that HMRC has been turning down applications from companies who pay dividends as part of their pay packages. According to a spokesman for HMRC, if a company had recently paid dividends while not paying their taxes promptly, they would not be accepted into the TTP scheme. The reason for this refusal is that the money for the dividends should have been used to pay the tax debt, rather than pay shareholders. The question regarding dividends is asked to all companies as part of routine enquiries to ensure that money that should be used to pay a tax bill isn’t used to pay another creditor. The spokesman said:
“In essence, if a company has spare cash to make non-contractual payments to shareholders then it can pay at least part of its tax debts.”
It is feared that companies who have received advice to pay dividends rather than a bonus, for instance, will not be accepted for the Time To Pay scheme. HMRC believe that shareholders should support their companies before paying dividends.
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