Reply to: Dividend date

[Gonzo]

If you think about the way big companies (e.g. Lloyds) pay out dividends, they declare them months before they actually pay them. It is the date they pay them and you receive the money in your grubby little mits that counts as far as tax is concerned. So I reckon it must be the same for us.

Not quite. In advance they declare the dividend amount, the day on which new shares will not receive the dividend, the day that will count as the dividend date, and then the day it will be paid.

The dividend date is the one that counts for tax purposes, not when the money is paid, or when it is received by the shareholder.

[Sockpuppet]

Any accountants on here care to comment?

Because of the impending "income shifting rules" I want to take the biggest dividend possible.

My agency pays VERY fast. So it's likely that March's fees will arrive in my business account before April 5th.

However it will take time for a cheque to clear in my personal account which would take me into the following tax year?

You can declare the dividend as long as you have the profit to do so. As this is done on invoice dates as long as you have invoiced for the work you can dividend the profit.

[Hex]

Still minimum of 3 working days so not much better than cheque.

What about CHAPS then? Shouldn't cost much more than £30 and transfer is same day.

[Friendly Accountant]

Taxable when paid BUT......

For personal tax purposes, the dividend is taxable to you when it is paid, or available to you. Generally, when a dividend is declared, the payment date is specified. The company should prepare a tax voucher which states the date on which the dividend is to be paid.

Whether or not cash flows on the payment date is generally not relevant for a small company. If the payment date is before the end of March, the proper accounting for this in the company's records will be to credit the director loan account if cash is not paid on the date (assuming you are a director).

HMRC has indicated that an entry to the director loan account is enough for the dividend to be considered paid and therefore taxable to you.

In summary - company declares a dividend and specifies a payment date. That payment date determines when it is taxed. The fact that cash may flow later on is irrelevant.

[TheFaQQer]

I think it's on when it is declared rather than when it is actually paid. That's what my accountant told me - last year I declared mine on April 4th but didn't get round to paying it until much later as I was away.

[MickeyP]

Can you do BACS and get it cleared quicker?

Still minimum of 3 working days so not much better than cheque.

[Hex]

Any accountants on here care to comment?

Because of the impending "income shifting rules" I want to take the biggest dividend possible.

My agency pays VERY fast. So it's likely that March's fees will arrive in my business account before April 5th.

However it will take time for a cheque to clear in my personal account which would take me into the following tax year?

Can you do BACS and get it cleared quicker?

[MickeyP]

Any accountants on here care to comment?

Because of the impending "income shifting rules" I want to take the biggest dividend possible.

My agency pays VERY fast. So it's likely that March's fees will arrive in my business account before April 5th.

However it will take time for a cheque to clear in my personal account which would take me into the following tax year?

[Lewis]

My accountant told me that divs should be paid on the date they are declared, although this seems contrary to what other replies say they were told.

I assume that it's the date of declaration which counts and money not actually paid out on that date will be deemed to have been paid into the director's loan account on the date of declaration.

I wonder if it is down to whether or not you do cash accounting? I'm cash accounting so I use dates from my bank statements for everything. I pay in a cheque to my personal account the day the dividend is declared and enter it in my accounts as the date it leaves my business account. If just transferring into loan account (i.e. not on a business bank statement) I would use the dividend declaration date).

[Platypus]

If my ltdco issues a dividend voucher dated 31 March, but it's not paid to me until after 6 April - for self assessment will that count against my 2007/08 or 2008/09 income ?

My accountant told me that divs should be paid on the date they are declared, although this seems contrary to what other replies say they were told.

I assume that it's the date of declaration which counts and money not actually paid out on that date will be deemed to have been paid into the director's loan account on the date of declaration.

[moorfield]

Agree with you Hex and crack_ho - that makes sense to me. Will check with my accountant too. Thanks.

[Sockpuppet]

Which brings up the interesting question of if you declare divis on the 31st March does paying them in April fall fould of the S660 rules.

[crack_ho]

My accountant told me its the date it is paid that counts as I have been in this situaion before.

[Hex]

If you think about the way big companies (e.g. Lloyds) pay out dividends, they declare them months before they actually pay them. It is the date they pay them and you receive the money in your grubby little mits that counts as far as tax is concerned. So I reckon it must be the same for us.

[Hex]

I reckon it's the date it's paid that counts. But IANAA.