Can I mix my salary with dividends?

[d000hg]

Out of interest is there any practical difference between creating the dividend docs the day you take the money, and creating these back-dated at year-end in one go?

In case you forget

I put all the dividends as single rows in a simple spreadsheet so they are recorded... then write up the official documents later i.e. year-end.
I don't know if this is technically wrong or not though - to pay dividends before the voucher is completed, even if nobody can tell!

[Sockpuppet]

I pay myself what i need for the month (and no more) in one payment then figure out what proportion of the payment is salary/expenses/divs later in the year to fit best with tax planning....I've never had a problem with this approach, but it does leads to some strange div figures!

Having been involved in investigations, I can tell you it's a lot quicker to handle them if you can show the bank statements and clearly match individual payments to wage summaries and dividend vouchers. If you can't, you then have to provide backup schedules to show how each payment relates to a voucher or payslip plus which expenses it included. Preparing a tax return for someone who has just paid random amounts and then expects you to reconcile it at year end against a wage summary and non-existent dividend vouchers is also no fun. If your accountant includes full investigations and your tax return at no extra charge then great. If they are going to bill you for the investigation/return on the basis of how much time and effort it takes them, it's going to cost you more.

It's a lot easier for you to get into a mess that way too, as you can't clearly look back and identify payments yourself.

The mortgage company would be unlikely to be purely looking at your bank statements and lending on the basis of what you've paid in (that doesn't prove what you earn, just what you pay in which could come from numerous sources unrelated to ongoing income). They would write to your accountant and request details of your company profits, dividends and wages.

You're not a permie though: you have to account for YourCo's transactions. What permies and their emplyers do is f*** all to do with this debate.

It's about risk management. If you have a PAYE inspection, and Hector sees single amounts of income appearing in your personal account, he will simply ignore your supporting paperwork and declare it all as salary and so liable to PAYE and NICs. If however you give him documentary evidence of a minuted dividend payment plus associated tax voucher and can point to a discrete matching payment in your own account that is clearly separate from your salary and expenses, he can't.

It's not much effort to do it properly. Not doing it properly can prove expensive. So do it properly. Understand?

I mix payments. Then again I account for stuff separably. I'm have nominal code in sage set up to show Sockpuppet Cash Owed etc. When I pay myself or pay some expenses or even a dividend I move the cash into this nominal code as separate transactions. When I need some money I then usually take round figures out of this code e.g. £5000, £10000 etc. So some money can sit in this code for a while and I appear on the accounts at year end as having cash owed to me.

However. I generally only declare dividends once a year so those go into that code as £10k and out as £10k etc. Expenses, wages are all rolled up and taken each quarter again as flat £5k etc payments.

This might be right, it might be wrong but I can show exactly what I owe to Hector and how many dividends i've taken. But I do only do this 4 times a year not 12 like some other people and with one div would be easier for me to show what is a no salary.

[Joeman]

everyone always coming up with scare stories about being investigated, so who has then? a few pointers on dos and donts?

Exactly!! seems to be a lot of decisions made based on guess work, and fairy tales...

Accountants always take the safe option (which is why we pay them to keep us in check!!) but my point is that there seems to be no definitive evidence or documentation from HMRC that categorically states that combined Div/Salary/expenses payments, even when supported by correct paperwork are any more risky than individual payments.

In fact a bit of googling turned up this thread, where even the Accountants are in disagreement:

Dividend Payment procedure. Am I being pedantic ? | AccountingWEB

Common sense, (and the experts) would suggest that two payments is the safest option, but in the absence of any clear guidelines from HMRC, or documented cases where single payments have landed people in trouble, are we all just making a big assumption??
For the Taxman to say the single payment is all salary, he would need to disregard the accounting records, Div vouchers, meeting minutes, and the payslips, and if the taxman can do that, then why do we bother to do any paperwork in the first place??

[Sockpuppet]

I make it easy. I pay any money the company owes me into an "account" i.e. lend it back to the company straight away.

Then I take payments from this. Simple clear and keeps the books straight. Mostly my divs are round numbers, £5k £10k etc and they also come out as another payment. Sometimes I pay myself 4 months in one go plus expenses and take half of it. Then pay the rest out the next time I take a dividend payment.