personal tax return - dividend

[7of9]

thank you all

Thank you very much for the replies! I had a meeting with my accountant who is a charted accountant.

He has confirmed that the profit is calculated on an accruals basis therefore the payment date or the invoice dates are not important. As long as all invoices are then paid the profits are not reduced.

So in my case, I can declare max dividends in advance because the company knows the approximate profit at that point.

[Danielsjdaccountancy]

If work has been invoiced by your company then the value will be part of your turnover as at invoice date, so a dividend would be possible then (assuming your company has the profit).

Agree with Claire here.

Dividends are taxed at the point they are paid by the company, not when they are received by the individual.
If you’re straddling a tax year, date the cheque the year you want it to be applicable to and then bank it when you’re ready. You must however ensure you have the reserves available when you declare the dividend.
This is where a good software package or spreadsheet can be helpful so you can judge what reserves you have left after corporation tax.

[Clare@InTouch]

Thanks for the advice.
So as long as the work has been done, time sheets submitted and invoiced, I can declare the dividend?

If work has been invoiced by your company then the value will be part of your turnover as at invoice date, so a dividend would be possible then (assuming your company has the profit).

[7of9]

For the 'paid' date of a dividend, Craig is spot on. There is some useful info on this here - CTM20095 - ACT: General: Notes on company law aspects of dividends - take a look at sections 9 -14. Its a bit heavy going but does explain the case (it also refers to some old legislation but you get the general idea).

For the second question regarding paying a dividend in March for work done in May, section 4 of the above article (and then the subsequently mentioned sections) might help you understand why this won't work. If you were to draw up a set of accounts to 31 Mar 2011, would you include the income to be received in May? That is, has the work been done, and invoiced, but not yet paid. If the answer is no, then you can't draw a dividend as the profit has not yet been earned. Make sense?

Thanks for the advice.
So as long as the work has been done, time sheets submitted and invoiced, I can declare the dividend?

[Greg@CapitalCity]

For the 'paid' date of a dividend, Craig is spot on. There is some useful info on this here - CTM20095 - ACT: General: Notes on company law aspects of dividends - take a look at sections 9 -14. Its a bit heavy going but does explain the case (it also refers to some old legislation but you get the general idea).

For the second question regarding paying a dividend in March for work done in May, section 4 of the above article (and then the subsequently mentioned sections) might help you understand why this won't work. If you were to draw up a set of accounts to 31 Mar 2011, would you include the income to be received in May? That is, has the work been done, and invoiced, but not yet paid. If the answer is no, then you can't draw a dividend as the profit has not yet been earned. Make sense?

[Wanderer]

Next question is how long in advance can I declare my dividend.

I normally declare my dividend on the same date when I send the time sheets and invoice to my agency.

You must have profits before you can declare a dividend so my understanding is that you can't declare a dividend based on an expectation of future earnings.

I think you are pushing it to the very limit by declaring a dividend on an unpaid invoice. It's probably not illegal but one small mistake could make your dividends ultra vires which could make a big old mess.

In short: how can I fiddle the tax man?

I'm sure he's just trying to maximise the profits for the shareholders like any good company director would do.

[MrRobin]

You can only declare dividends from profits. If you won't realise that profit until May then you can't declare it until then.

[northernladuk]

Thank you for the replies.*

*Next question is how long in advance can I declare my dividend. For example I knew in March that I would work 20 days in May, can I declare dividend in March, then transferred *the money to my personal account in May when I received the payment in May? So the payment I received in may 2011 will belong to tax year 2010-2011?

I normally declare my dividend on the same date when I send the time sheets and invoice to my agency. But if I can declare dividend in advance, i rather put the dividend in tax year 2010-2011 as otherwise I will exceed the dividend base rate(35000) in tax year 2011-2012.

Thank you for the help.

You have answered your own question.

[Ruprect]

Thank you for the replies.*

*Next question is how long in advance can I declare my dividend. For example I knew in March that I would work 20 days in May, can I declare dividend in March, then transferred *the money to my personal account in May when I received the payment in May? So the payment I received in may 2011 will belong to tax year 2010-2011?

I normally declare my dividend on the same date when I send the time sheets and invoice to my agency. But if I can declare dividend in advance, i rather put the dividend in tax year 2010-2011 as otherwise I will exceed the dividend base rate(35000) in tax year 2011-2012.

Thank you for the help.

In short: how can I fiddle the tax man?

[7of9]

Thank you for the replies.*

*Next question is how long in advance can I declare my dividend. For example I knew in March that I would work 20 days in May, can I declare dividend in March, then transferred *the money to my personal account in May when I received the payment in May? So the payment I received in may 2011 will belong to tax year 2010-2011?

I normally declare my dividend on the same date when I send the time sheets and invoice to my agency. But if I can declare dividend in advance, i rather put the dividend in tax year 2010-2011 as otherwise I will exceed the dividend base rate(35000) in tax year 2011-2012.

Thank you for the help.

[ASB]

I am filling my personal tax return for tax year 6 April to 5th April 2011. During these 12 months, the first 7 months I worked as full time employee and my employer paid more tax so I can claim the extra back. For the rest of the 5 months, I worked as contractor. My account asked me to have NO salary, so I only withdrew dividend.

Here is my silly question, when I put down the dividend on tax return form, do I calculate those dividend ‘paid’ before 5th April 2011 or ‘declared’ before 5th April 2011?
The reason I asked: I declared 5000£ dividend on 30th March 2011, but the money was not transferred until 20th April 2011. If I include this 5000£ in tax year 6 April to 5th April 2011, I wont need pay extra tax for it. But if I don’t, it will fall in 2012 tax year; therefore I will probably pay more tax as I will exceed the basic rate.
My accountant said I can include this 5000£ in tax year 6 April to 5th April 2011, because it is the declaration date that’s count. I just want to be sure.

I believe you are OK for 10/11. I assume it was an interim dividend though.

It is the date you were paid that is important and this surely was not in fact the 20th April, but would have been 30th March since it would (should) have been posted to the directors current account and that means it is paid.

See here: Dividend payment date for tax purposes | AccountingWEB

[Clare@InTouch]

Absolutely agree, it's the declaration date not the payment date that counts. Just make sure you have the voucher to back it up.

[7of9]

I am filling my personal tax return for tax year 6 April to 5th April 2011. During these 12 months, the first 7 months I worked as full time employee and my employer paid more tax so I can claim the extra back. For the rest of the 5 months, I worked as contractor. My account asked me to have NO salary, so I only withdrew dividend.

Here is my silly question, when I put down the dividend on tax return form, do I calculate those dividend ‘paid’ before 5th April 2011 or ‘declared’ before 5th April 2011?
The reason I asked: I declared 5000£ dividend on 30th March 2011, but the money was not transferred until 20th April 2011. If I include this 5000£ in tax year 6 April to 5th April 2011, I wont need pay extra tax for it. But if I don’t, it will fall in 2012 tax year; therefore I will probably pay more tax as I will exceed the basic rate.
My accountant said I can include this 5000£ in tax year 6 April to 5th April 2011, because it is the declaration date that’s count. I just want to be sure.