Dividend % Change for Tax Year 2008/2009

[Bumfluff]

It doesnt matter when received, take total profit for year and apportion. Include amounts invoiced for before end of year but not paid. Your calc is right principle but is done on days, not months (even changes in leap year) think there is a calculator on hmrc website somewhere.

Cheers Xoggoth this will defo save me some cash

[Hex]

I seem to remember my last one was pro-rata'd by the number of days rather than by the number of months, but in essence it was this calculation.

[chris79]

I would also like to know the answer to the above question, whilst my accountant is preparing my year end I would like to know how this works.

My company year end is April 4th, my accountant says that on this basis the company year end becomes the last day of the month, so April 30th.

On this basis it must mean I am paying corporation tax on my profits at 20% for 11 months, and 21% for one month.

Is the calculation therefore as above, regardless of when income was received into the company?

Thanks.

[xoggoth]

It doesnt matter when received, take total profit for year and apportion. Include amounts invoiced for before end of year but not paid. Your calc is right principle but is done on days, not months (even changes in leap year) think there is a calculator on hmrc website somewhere.

[Bumfluff]

Hi,

So lets say I have £100k profit an end of company year, 11 months of my company year 20% applied, for one month it was 21 %. Would my calcs be,

£100k / 12 (months) * 11 * 0.20 = £18333 ct due at 20%
£100k / 12 (months) * 1 * 0.21 = £ 1750 ct due at 21%
£20083 Total CT Due

What Im trying to get at is does it matter when the revenue actually came into the company or do you just apportion it equally ? For example lets says 90% of my revenue and profit came in during the last month of my company year, would I need to apply 21% to this amount rather than just 21% on the monthly apportioned profit ?

[backlight]

Is it advisable to pay your yearly salary after April 6th as well (lump sum)? Or should this be paid monthly?

[dude69]

it makes NO difference when you pay your dividends in terms of the CT rate going up. The CT is payable 9 months after financial year end, and the profit will be taxed based on the CT rate for the financial year. Where two rates prevail during the year, it is apportioned pro rate.

Far more important is to ensure you use up your basic rate allowance by declaring dividends before 6 April. Equally it makes sense to pay dividends immediately AFTER 6 April up to your basic rate allowance.

[Nixon Williams]

Hi Guys,

Just after some confirmation.

As the tax year for 2008/2009 begins on April 6th, 2008, I'm right in saying that as long as profit is declared either today or tomorrow at the weekly / monthly / adhoc company meeting and is suitably minuted, the corp tax rate will be 20%.

Also, if an invoice is raised before the company meeting, then the invoiced amount can be included in the calculations for company profit?

When the corporation tax rate changes, the annual profits are taxed on a pro-rata basis, so if the company year-end is 30th September 2008, then half the profit will be taxed at 20% and half at 21%. In effect the tax rate would be 20.5% for that year.

For preparing accounts, the invoice will be included if the work invoiced is in the period. So, following on from the above, if the invoice is dated 01/10/08 (ie after the year-end) but relates for work done in September, this would be included in calculating the company profit.

Remember that whilst you may have profit, you may not have the cash to pay out the dividend, ie you may be waiting for invoices to be paid etc.

Also it is important to remember to only pay dividends from profits and ensure that your paperwork is in order.

Alan

[Weltchy]

After some digging around on the HMRC website, it is indeed the 1st April.

In which case, yes, I'll have to apportion it.

[Weltchy]

1st April? hrm, so the start of the year for ct runs differently from the HMRC personal tax year start of the 6th then?

[Danbro]

Danbro Accounting Ltd

Hi,

I can see that you are talking about raising Dividends so they fall into the 07/08 tax year and hopefully fully utilise your middle rate band.

The answer is yes, if you raise a Dividend and prepare Dividend Vouchers pre 6/4/08 then they can be included in your 07/08 tax return, make sure you have sufficient profits to raise such dividends.

With regards to your invoice query, an invoice will be included in your accounts by the invoice date, so if the invoice is raised prior to your accounting year date or 6/4/08 then it can be included in your profit calculation.

Thanks

Neil

[xoggoth]

Declare profit? That's a new one. The way it works is that you take the profit for the company year and apportion it according to the days up to and from April 1st then apply the appropriate CT rate to those two portions.

PS However, do what your are planning anyway. if you are potentially liable to higher rate personal tax, there are good reasons to make sure you review your profits and minute your divis before 6th, but that is to do with personal tax not CT.

[Weltchy]

Hi Guys,

Just after some confirmation.

As the tax year for 2008/2009 begins on April 6th, 2008, I'm right in saying that as long as profit is declared either today or tomorrow at the weekly / monthly / adhoc company meeting and is suitably minuted, the corp tax rate will be 20%.

Also, if an invoice is raised before the company meeting, then the invoiced amount can be included in the calculations for company profit?