More on Dividends

[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.

[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.

[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.

[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.

[ASB]

HMRC take a view that if your books aren;t in the best of order then your attitude to tax paying in general may be a bit lax. Therefore, if you don't have the appropriate paperwork for the dividends (IMO: appropriate paperwork is Dividend Declaration Minute and Dividend Voucher) then they will take a closer look.

Couldn't agree more. When the requirement for all LTDs to have an audit was dropped in the distant past we moved a couple of years later to a bookkeeping service. Audits were expensive things so we saved a good few hundred quid. The service we used made a complete arse of it and the accounts they filed didn't add up. It was our lucky year to get the quick check. This then turned into a full investigation lasting about 3 years. There were some issues over unpaid taxes - mainly due to some claims that were optimistic at best - e.g. rent a room scheme for the company office . About 3 grand of fees etc later it was all resolved but it wasn't a lot of fun.

[Alan @ BroomeAffinity]

Whether there is no legal requirement to minute dividends is irrelevant, IMHO.

HMRC take a view that if your books aren;t in the best of order then your attitude to tax paying in general may be a bit lax. Therefore, if you don't have the appropriate paperwork for the dividends (IMO: appropriate paperwork is Dividend Declaration Minute and Dividend Voucher) then they will take a closer look.

Also, as has been stated, if the paperwork is not in order, then HMRC can deem that the divi payments are actually untaxed salary payments and thats best avoided.

I don't see what the issue is anyway: How long is it going to take to do the paperwork? 5 minutes at most, so why not just do it regardless of the legal requirement.

Don't think the OP's accountant is giving best advice either.

[xoggoth]

I have also had the same advice from more than one accountant, "oh we'll just fill those in later" AFAIK there is actually no legal requirement to minute dividends. The more important bit is the tax voucher, but assuming you date it, that is a proper record anyway, you could always sign it if it makes you feel happier.

Also if timing of divi is relevant to higher tax, eg you pay yourself to max just before 5th April, may be best to make sure the actual payment appears in bank statement at right time just in case they query if it was really paid when you said.

[dude69]

No. When investigated HMIT made no requests for the minute book etc, never queried the validity of any dividends paid - save for verifying net shareholders funds were not negative. I imagine if HMIT did request the minutes they would probably be discovered anyway. :-)

But, the fact remains that they can do all the above.

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

[VectraMan]

Minutes are just signing and dating a piece of paper. Not sure why you wouldn't bother.

[ASB]

"what's the worst that could happen if I don't"

Well, HMIT decides that since the dividends are not minuted they were not in fact dividends but just random drawings. They are then due PAYE and NI and penalties and interest on the shortfall. The accounts for all those years need to be restated and resubmitted, the CT calcs all need to be redone. It's quite a long list.

But is that actually likely to happen ?

No. When investigated HMIT made no requests for the minute book etc, never queried the validity of any dividends paid - save for verifying net shareholders funds were not negative. I imagine if HMIT did request the minutes they would probably be discovered anyway. :-)

But, the fact remains that they can do all the above.

[Chugnut]

Since it's very little effort to actually minute the divs and a legal requirement according to my accountants, why not bother doing it?

The only contentious and frequently debated aspect of this post is the very low salary level, not the recording of the divs.

Your accountant sounds like a weapon.

[themistry]

get a new accountant...

oh my god

TM

[oracleslave]

I had an interesting conversation with my accountant. I have my own LtdCo and am as sure as I can be that I'm not caught by IR35.

He strongly advised me to pay salary of no more than 450 a month and anything else in dividends. He went on to say that it wasn't necessary to minute the divis and issue vouchers on the basis of "what's the worst that could happen if I don't"

Given all the advice I've seen on here, I regard this as risky to say the least....

This seems to contradict the advice SJD have given me that is along the lines of "due to the increase in the minimum wage legislation" please pay yourself salary of (I can't remember the exact figure but it's around £900)

I also don't agree with not minuting the dividends.

[Peoplesoft bloke]

I had an interesting conversation with my accountant. I have my own LtdCo and am as sure as I can be that I'm not caught by IR35.

He strongly advised me to pay salary of no more than 450 a month and anything else in dividends. He went on to say that it wasn't necessary to minute the divis and issue vouchers on the basis of "what's the worst that could happen if I don't"

Given all the advice I've seen on here, I regard this as risky to say the least....