Dividends

[Nixon Williams]

If your company/accountant produces management accounts (like we do), ie interim financial statements showing the profit earned to date, then it is perfectly ok to declare a dividend based upon these statements.

The statements should show profit and the corporation tax accrual, so clearly showing what is available for dividends.

Of course as a responsible director, you should reserve some funds for unseen eventualities etc and ensure that the dividend is properly declared, this is a common problem area that we, dividends incorrectly or not even declared.

I would strongly advise against using funds reserved for taxes, to pay a dividend, I think without exception when I have seen this, the company/director spirals into debt.

Alan

[russell]

I would avoid going down the route of taking profits out of tax money, been there done that, then had to reduce them to get back in front. If the tax man asked for everything owed to him right now, you should have that in the bank plus more if possible. I plan to have all current owed tax and 6 months normal salary.dividend.

[Zoiderman]

And your profits don't materalise and you have spent the tax mans money and no way to make it back. Yer, I can see the tax man being happy with that.

12 month contract paying x != you will get it.

Don't knock it until you try it; I spoke to the tax people about this, after receiving contradictory advice from accountants. This was from them, verbatim. Not advised, but perfectly legal.

[ASB]

I am led to believe, that you can take dividends on projected profits; you don't actually have to have them e.g. if you have a 12 month contract paying x, then it is ok to drag down profit on what you will be earning in the next 12 months.

Thats what I was told

What constitutes distributable reserves can be complex. One of the accountants kindly posted the relevant guidance.

In the case you mention I think it would be difficult to book those profits. Though I think its pretty safe to include things that have been invoiced - provided there is a reasonable expectation of the debt being settled. Taking anything forward is tricky, in the event your expectations are not met it can lead to having to do as certain amount of explaining.

[northernladuk]

I am led to believe, that you can take dividends on projected profits; you don't actually have to have them e.g. if you have a 12 month contract paying x, then it is ok to drag down profit on what you will be earning in the next 12 months.

Thats what I was told

And your profits don't materalise and you have spent the tax mans money and no way to make it back. Yer, I can see the tax man being happy with that.

12 month contract paying x != you will get it.

[Zoiderman]

It also means you could have a problem with your dividends. You can only pay dividends from profit.

I am led to believe, that you can take dividends on projected profits; you don't actually have to have them e.g. if you have a 12 month contract paying x, then it is ok to drag down profit on what you will be earning in the next 12 months.

Thats what I was told

[Danielsjdaccountancy]

Hi

Just submitting return to tax office, does it matter that the retained profit is less than tax owed or is this ok?

Thanks

No problem at all, as previously mentioned, retained profit is after corporation tax, so where you take your dividends from.

[psychocandy]

Hi

Just submitting return to tax office, does it matter that the retained profit is less than tax owed or is this ok?

Thanks

WTF....

Retained profit is dosh left AFTER tax owed so unless this is negative you've got enough to pay CT!!!!!

[Greg@CapitalCity]

Just submitting return to tax office, does it matter that the retained profit is less than tax owed or is this ok?

Its OK.

[northernladuk]

It also means you could have a problem with your dividends. You can only pay dividends from profit.

[Gonzo]

Hi

Just submitting return to tax office, does it matter that the retained profit is less than tax owed or is this ok?

Thanks

If the retained profit is less than the tax owed that is not a problem.

If your question is really about whether or not it is OK that the retained funds plus outstanding debtors is less than the tax owed then that is a different matter. That would technically make your company insolvent.

[topper]

Given retained profit is AFTER CT\PAYE\NI and all other taxes due, then providing you pay Hector what's due there won't be an issue, there maybe an issue with regards your war chest and being on the bench though!!

Think your thread title needs to be a bit more descriptive and accurate though!

[Savvy]

Hi

Just submitting return to tax office, does it matter that the retained profit is less than tax owed or is this ok?

Thanks