More on Dividends

[Peoplesoft bloke]

Thanks for this - my accountant came recommended and I've spoken to the bloke who recommended him and another colleague who uses him. Neither of them has bothered with piffling paperwork like minutes and divi vouchers - a poll of the other contractors on my site suggests their accountants do the paperwork.

I'm not really happy that he's more or less saying I'm daft for wanting to do the proper paperwork, so I'm going to do it anyway - as posters have observed it's 5 minutes work so hardly the end of the world.

I may consider getting a new accountant however.

[philip@wellwoodhoyle]

Exactly. When HMRC come knocking, you fill out the dividend forms then.

Which is OK if you can. What happens if you have died or become incapacitated and physically can't sign the paperwork. You are leaving quite a legacy for your next of kin who may well end up out of pocket. As others have said, what is the problem? Just set up a template on word or excel and print them off and sign as you pay each dividend. If there are more than one director/shareholder, then minutes are essential to avoid disputes later on.

By the way, it is worth pointing out that what matters is that there was a directors meeting held to approve the dividend - the usual way of proving that a meeting was held was to prepare and sign minutes, which don't have to be signed at the same time as the meeting - after all, minutes are merely confirming a meeting happened and it is quite common for minutes to be signed at the next meeting. In the case of a sole director, simply by paying the dividend could be construed as a meeting - i.e. the mere act of writing "dividend" on his cheque stub or entering "dividend" as the narrative on the online banking screen. What is more of a problem is where a director makes various payments, some to himself, some to third parties - then there is real doubt as to what the payments really are - it is these circumstances when the tax inspector may successfully argue that they aren't dividends.

[malvolio]

Thanks, Philip, that's how I've always read it. My ledger has a line for Dividends, and the payment narrative says quite clearly "...dividend payment". That should suffice IMHO.

[IR35 Avoider]

But is that actually likely to happen ?

I had an aspect enquiry very recently in which HMRC wanted only the dividend minute and bank statements showing when a particular dividend was paid. They explained when they closed the enquiry that they had wanted proof the dividend was really declared and paid in March, apparently there would have been some adverse tax consequence had it been paid in April.

Had my dividend not been properly documented they could have (as you pointed out) declared that dividend and all dividends for the previous six years were really salary and extracted many tens of thousands of pounds in completely avoidable tax from me.

The 2 minutes it takes to load a dividend minute into Word, alter the details, print and sign it seem like a small price to pay to avoid that bill.

Believe me, when you are facing a bill of that size, you are going to want there to be not the smallest smidgeon of doubt that your dividend payments will be accepted as such.