Reply to: Deferring Dividend payments

[VectraMan]

The main reason is to avoid paper works pertaining to dividends.

I'd have thought the complication caused by having dividends declared and not taken would outweigh that.

The only benefit I can see to this is if there were two shareholders, and one wanted the money sooner and one wanted to wait. But with a single owner company, just declare what you want when you want it.

[northernladuk]

Utter bollocks. There's nothing in legislation which states how frequently or infrequently dividends can be paid. A company can declare dividends as frequently as it likes.

I think thats a bit harsh. If you read my statement I think you will read that I said you can't do it too often? Are you sure you read it right?

[Gonzo]

Can a company declare dividend and pay it to the shareholders in parts?
Example:
Dividend declared £10000 on October 1
Paid to the shareholder (sole shareholder & director)
On Nov 1 : 3000
On Dec 1 : 3000
On January 1: 4000

This way, I want to avoid declaring devidends too often. Is this allowed?

As the others have said, yes it can.

As the others have said, why would you do this? For personal tax purposes the dividend is treated as income recieved on the date it is declared so take all the money in one go and stick it in a savings account or offset mortgage until you need to spend the money.

[BiggieBig]

execuse my ignorance but how to you obtain divendend vouchers / minutes do you just write them up in work.

[Ashwin2007]

Minutes aren't necessary, just transfer the dividend and let your accountant know how much and when.

I have always been sennding monthly spreadsheet to my accountant with details of all transactions.

Aren't minutes necessary any more? I thought we have to keep the minutes as a record for complying with HMRC requirements.

If minutes are not needed, what other documents we need to keep (Dividend vouchers?)

[singhr]

This way I have fewer number of dividend declaration minutes to prepare..

Minutes aren't necessary, just transfer the dividend and let your accountant know how much and when.

[Maslins]

The main reason is to avoid paper works pertaining to dividends.

Software like FreeAgentCentral does all your paperwork for you. Also, no need for dividend minutes to show when money should be taken.

I am not sure whether I should transfer the complete declared dividend amount within the company's tax year (in my case it is October to Sept) or Director's personal tax year (April to March), and the implications of doing one way or the other.

If retained profits aren't an issue, and you really want to declare dividends as infrequently as possible, then probably best to declare a big one on 6th April each year, and draw down on it gradually.

It makes no difference from the Company's tax POV, and by doing it on that date you push it back a year for your personal tax (ie dividend declared on 6 April 09 will only lead to a tax liability on 31 January 2011)

As implied by ASB, if there's any tailoring to do, it should probably revolve around your personal income. If you're not in higher rates there will be no tax on the dividend at all. Declaring a bigger dividend in a year when you are a higher rate taxpayer makes little sense if you could instead have declared it in a year when you had basic rate band to spare.


Question...on the basis you have plenty of retained profits, does the business also have plenty of cash? If so, why can't you actually pay the big dividend in one chunk, on 6 April or whatever date you choose?

[BolshieBastard]

Didn't we ascertain in another thread that you can't really declare dividends too often as long as you don't get stupid with it. I thought monthly was perfectly acceptable?

Am having a long day so excuse this if it's really stupid but 3+3+6= 12k.... you declaring 10k?? Shum Mishatake Shurley..

Utter bollocks. There's nothing in legislation which states how frequently or infrequently dividends can be paid. A company can declare dividends as frequently as it likes.

[Ashwin2007]

Thanks very much for all your responses.

Why???

The main reason is to avoid paper works pertaining to dividends. I also want to avoid looking like declaring dividends too often.

Of course on the date of declaring dividend, I have enough profit to declare the dividend.

I am not sure whether I should transfer the complete declared dividend amount within the company's tax year (in my case it is October to Sept) or Director's personal tax year (April to March), and the implications of doing one way or the other.

In case of deferred dividend payments, on the Dividend declaration minutes, I want to mention that the declared dividend will be paid to the shareholder on the fiollowing dates:
Date Amount Paid
.... .......

This way I have fewer number of dividend declaration minutes to prepare..

[ASB]

Yes, that's perfectly fine.

As others have suggested, the declared dividend (which should you do proper paperwork for, dividend voucher, board minutes) will simply sit as a creditor on the balance sheet as money owed to you.

You can then draw that down at a later date with no further tax consequences.

True, but there are circumstances in which it can be a disadvantage. e.g. declare 100k of dividend in year 1. About 60k of this will be subject to higher rate tax irrespective of when it was paid.

Ensure that anything declared but unpaid doesn't go into a higher rate bracket.

If one want to be creative with Tax Credit check out how the 25,000 income disregard for one year works. The system is open to exploitation (as I found out by mistake!).

[northernladuk]

Didn't we ascertain in another thread that you can't really declare dividends too often as long as you don't get stupid with it. I thought monthly was perfectly acceptable?

Am having a long day so excuse this if it's really stupid but 3+3+6= 12k.... you declaring 10k?? Shum Mishatake Shurley..

[Lewis]

Can a company declare dividend and pay it to the shareholders in parts?
Example:
Dividend declared £10000 on October 1
Paid to the shareholder (sole shareholder & director)
On Nov 1 : 3000
On Dec 1 : 3000
On January 1: 6000

This way, I want to avoid declaring devidends too often. Is this allowed?

You must have the full £10,000 profit on the 1 October of course ...

[Maslins]

Yes, that's perfectly fine.

As others have suggested, the declared dividend (which should you do proper paperwork for, dividend voucher, board minutes) will simply sit as a creditor on the balance sheet as money owed to you.

You can then draw that down at a later date with no further tax consequences.

[Platypus]

My accountant told me "no"

If you want to do this, declare a dividend and (on paper) transfer the funds to the director's loan account, from where it can be drawn at your leisure.

You need additional paperwork to do this. An EGM I recall.

Speak to your accountant.

[moorfield]

Can a company declare dividend and pay it to the shareholders in parts?
Example:
Dividend declared £10000 on October 1
Paid to the shareholder (sole shareholder & director)
On Nov 1 : 3000
On Dec 1 : 3000
On January 1: 6000

This way, I want to avoid declaring devidends too often. Is this allowed?

As long as the divi paperwork is done and the whole divi amount is allocated to the right year on your Self Assessment, I don't see a problem with that. But IINAC etc. etc. I think the number bods put unpaid divis on to the directors account.

There is frequently a lag between when I declare and pay the divi out, albeit only 7-10 days but I always pay the full amount.

But unless your ltdco is suffering cashflow problems, why not just pay out the full amount and stick the rest in a savings account somewhere?