Are there rules on how soon a dividend should be paid once agreed?

[d000hg]

If a company holds a meeting and agrees a dividend, but the payment is not made immediately, are there rules here?

I'm particularly thinking about FreeAgent and the end of the tax year... if you agreed a dividend on 1 April, there's not (AFAIK) a way to add this in FA except by linking it to the bank payment, so if the payment was made on April 6th it would automatically put the dividend in the next tax year and create a dividend declaration accordingly.

I see FA has 'Journal' which suggests it would let you manually set up a dividend voucher, but it seems I do not have access to edit this.

What are the rules, and is this just one of those things you drop the accountant a line and they sort it? How big a gap could you leave?

[northernladuk]

Posting journal sets to create a dividend – FreeAgent

Could leave a big a gap as you want if you mark it as a directors loan.

Bearing in mind getting it wrong could be very expensive my accountant would be my first call.

[jamesbrown]

As long as the dividend was marked final, then it's taxed on the declaration date (the date made available to you). Yes, you'll need to add a pair of entries in the FA journal, the first one debiting 908-1 Dividend: "d000hg's dividend" and the second one crediting 907-1 Director Loan Account: "d000hg's dividend". You can then mark the bank debit against the DL account. If you cannot access the journal, then ask your accountant. Weird you can't though.

[Maslins]

As other posters have said, this is reasonably normal. However, the dividend should have at least been formally agreed on at the date you post the journal, rather than it being a retrospective decision now.

FreeAgent users have a sliding scale of permissions. Sounds like your accountant has set you a little below the max to minimise risk of you causing havoc by playing around with things

[northernladuk]

FreeAgent users have a sliding scale of permissions. Sounds like your accountant has set you a little below the max to minimise risk of you causing havoc by playing around with things

Can't blame them for that though

[d000hg]

Can't blame them for that though

It is their job...! Who wants people not familiar with FA doing stuff with it they don't need to. I'd restrict clients unless/until they asked for features, demonstrating they at least had some idea what did features did

I'd argue the date of a dividend should not be dictated when it was entered in some financial software though. The software is still just an aid, only the official documents and returns are definitive (?)

Anyway thanks. I knew (had a meeting with myself to decide!) a dividend was issued at the start of the month (I can produce documentation outside FA) but it was reliant on invoices issued but not yet received to leave enough cash in the company account... Regardless of billing I like the account to always retain enough cash for outstanding tax and a couple months salary at all times. And I couldn't log it in FA. Now the invoices are settled it seems the company will pay the dividends and I simply ask the accountant to journal the dividend.

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[Hobosapien]

Sounds like quirks of the software that mean an appropriate process needs following for it to show things as required.

From a pure accounting point of view the declaration date is what's important for tax purposes (e.g. self-assessment for paying divi tax and impact on total personal income re tax bands) and the actual amount declared can remain in the Ltd as a director's loan back to the company indefinately. Once declared the tax is sorted out around that declared date so withdrawing at any time in the future such as a different tax year is irrelevant regards personal tax as it's already been handled and paid in the tax year it was declared.

So no rule on how soon after being declared it actually needs paying out to the individual.

[TheCyclingProgrammer]

Sounds like quirks of the software that mean an appropriate process needs following for it to show things as required.

From a pure accounting point of view the declaration date is what's important for tax purposes (e.g. self-assessment for paying divi tax and impact on total personal income re tax bands) and the actual amount declared can remain in the Ltd as a director's loan back to the company indefinately. Once declared the tax is sorted out around that declared date so withdrawing at any time in the future such as a different tax year is irrelevant regards personal tax as it's already been handled and paid in the tax year it was declared.

So no rule on how soon after being declared it actually needs paying out to the individual.

For interim dividends it’s the date the dividend is paid which is important for tax purposes, not the date it’s declared. A dividend can be deemed paid whenever it’s made available to a director which includes crediting it the director loan account.