Reply to: Sporadic dividends

[SeanT]

What I do to make it absolutely clear that I'm declaring a single dividend is to use FreeAgent journals - create a single journal set showing the dividend entries and payment to the respective loan accounts with the appropriate splits (it still generates the dividend paperwork when you do this) - and then reconcile the bank payments as payments from the appropriate loan account.

I'm now doing the same for record keeping purposes (not least because I paid a divi on 31st March after generating my first invoice but before the company being paid)

[TheCyclingProgrammer]

freeagent generates the paperwork when you declare a dividend, so no need for a separate template.

It's paperwork is less than ideal for multiple shareholders though - it makes it seem like a single dividend split between shareholders is actually multiple dividends based on the wording of the minutes (which it generates for each dividend payment) and the vouchers.

What I do to make it absolutely clear that I'm declaring a single dividend is to use FreeAgent journals - create a single journal set showing the dividend entries and payment to the respective loan accounts with the appropriate splits (it still generates the dividend paperwork when you do this) - and then reconcile the bank payments as payments from the appropriate loan account.

[SeanT]

ditto.
Although now I have appointed Mrs. L. as a director we're going to have a board meeting this evening in an Italian restaurant

Make sure the bill is less than £100 for P11D purposes

[FrontEnder]

I have the template.

99% of the time it says the same thing.

freeagent generates the paperwork when you declare a dividend, so no need for a separate template.

[SueEllen]

I don't think a recorded board meeting is required anymore, just an agreement between shareholders, which can be verbal or silent if as only shareholder you don't want to be seen talking to yourself.

I have the template.

99% of the time it says the same thing.

[Hobosapien]

I don't think a recorded board meeting is required anymore, just an agreement between shareholders, which can be verbal or silent if as only shareholder you don't want to be seen talking to yourself.

[Lance]

I have a template for recording minutes for board meetings with myself.

When I had another director I had a template for recording minutes for board meetings with them. (The meetings actually took place. )

I have a template for a dividend voucher.

I have the meeting then complete the board meeting minute template and then dividend template. Frequently the board meeting with myself takes place in front of my laptop....

ditto.
Although now I have appointed Mrs. L. as a director we're going to have a board meeting this evening in an Italian restaurant

[SueEllen]

Not sure this is correct.
Do you have minutes from the board meeting that decides to pay a dividend? If you don't then it's a loan not a divi.
You're right that as long as it all balances at year end and you have the paperwork then you're not going to get busted. But what if something unexpected happens?

Like - being investigated part way through a year.
Or - dying.
Or - hospitalised and unable to backdate/forge the board meeting minutes....

I think you'll find it needs to be 'officially in order' at the time of payment.

I have a template for recording minutes for board meetings with myself.

When I had another director I had a template for recording minutes for board meetings with them. (The meetings actually took place. )

I have a template for a dividend voucher.

I have the meeting then complete the board meeting minute template and then dividend template. Frequently the board meeting with myself takes place in front of my laptop....

[Lance]

a note of the amount is kept for inclusion on the company annual accounts, and when the annual accounts are prepared a dividend receipt is handed to the shareholders showing what dividend was taken. It's only at year end when the accounts are submitted that it all needs to be officially in order for HMRC to be able to investigate if they decide to.

As I am the only shareholder that meeting to agree divi payout is a very simple one.

The note of the amounts through the year are on a spreadsheet I keep track of all bank activity for supplying to my accountant for preparing the year end account.

Not sure this is correct.
Do you have minutes from the board meeting that decides to pay a dividend? If you don't then it's a loan not a divi.
You're right that as long as it all balances at year end and you have the paperwork then you're not going to get busted. But what if something unexpected happens?

Like - being investigated part way through a year.
Or - dying.
Or - hospitalised and unable to backdate/forge the board meeting minutes....

I think you'll find it needs to be 'officially in order' at the time of payment.

[Hobosapien]

Surely this is effectively spending on your Director's Loan account throughout the year, and then settling that with a journal from the dividend account to the D/L account at the end of the year, with potential BIK impact when the D/L account balance exceeds £10,000?

Nope. How I understand it is that the shareholders agree to take a dividend out of the distributable profits (calculated to ensure corp tax etc is catered for when determining how much profit is currently available), a note of the amount is kept for inclusion on the company annual accounts, and when the annual accounts are prepared a dividend receipt is handed to the shareholders showing what dividend was taken. It's only at year end when the accounts are submitted that it all needs to be officially in order for HMRC to be able to investigate if they decide to.

As I am the only shareholder that meeting to agree divi payout is a very simple one.

The note of the amounts through the year are on a spreadsheet I keep track of all bank activity for supplying to my accountant for preparing the year end account.

Simple and legit, presuming my accountant is legit.

[chopper]

My approach was always that after invoice is paid so have cash in company account and know that most of it will be profit at the end of the year, draw divi on account for any amount required as and when, then at year end one divi is officially declared on accounts with paperwork to back up.

So the only place the divis taken in advance appear is on the company bank statement, which would only be seen by anyone other than accountant during any investigation. I only took them when I needed the extra cash above the normal salary, so not as regular as every month like a salary.

Never had any problem with this approach as it is legit, as advised by my accountant.

Surely this is effectively spending on your Director's Loan account throughout the year, and then settling that with a journal from the dividend account to the D/L account at the end of the year, with potential BIK impact when the D/L account balance exceeds £10,000?

[TheCyclingProgrammer]

I wouldn't be surprised to see the dividend thresholds changed in the next budget, given that Hammond tried it the last time round. That said, I wouldn't be surprised to see entrepreneur's relief disappear for close companies (or some other definition) in the coming years either.

I believe it's already been semi-confirmed that it will go down to £2k next year, although final confirmation will be in the budget.

In only amounts to a tax increase of £225 though and that's before accounting for any increase in personal allowance or higher rate threshold.

[TheCyclingProgrammer]

IMO if you have enough profit to do so you'll regret not using up your basic rate band in whichever combination of salary and dividends makes sense for your circumstances (which can vary based on things like share split, rental income etc.)

You may not need that money now but any money you can get out at the basic rate now and put into a savings account for a rainy day is less money you need to potentially take in the future at a higher rate to fund some kind of big purchase (house deposit, extension, car etc.).

[TheFaQQer]

As I'm currently a 'permietractor' via a brolly I'm leaving the cash in my Ltd to avoid the divi tax, having already paid the corp tax on it.

I may close the Ltd in the near future and go for 10% ent relief tax on the lot while that is still possible, or play the very long game and draw £5k divi each year to avoid the divi tax. Sort of like a tiny pension draw down.

I wouldn't be surprised to see the dividend thresholds changed in the next budget, given that Hammond tried it the last time round. That said, I wouldn't be surprised to see entrepreneur's relief disappear for close companies (or some other definition) in the coming years either.

[Hobosapien]

As I'm currently a 'permietractor' via a brolly I'm leaving the cash in my Ltd to avoid the divi tax, having already paid the corp tax on it.

I may close the Ltd in the near future and go for 10% ent relief tax on the lot while that is still possible, or play the very long game and draw £5k divi each year to avoid the divi tax. Sort of like a tiny pension draw down.