Declaring dividends

[Craig at Nixon Williams]

I'm new to contracting - have a question as my accountant is still on bloody holiday.

Can my dividends be declared / paperwork sorted once a year or does it have to be done at point of taking them?

Also - if I did this (directors loan I know) can I just offset this at year end as a dividend? I.e the money that would have been paid to me as a div in the first place but is no longer in my account.

Thanks for your help.

Dividends should be declared and paperwork prepared when they are taken – if you simply take money from the account without the appropriate paperwork then it is seen to be a loan and will be classed as a BIK on which you will be taxed. The extra tax can easily be avoided by sorting the paperwork at the time that the dividend is declared and it’s probably less work than having to go back over a year’s worth of stuff at the year end to work out the dividends.

Keep it simple and declare the dividends when you take them.

Get yourself a proper contracting accountant that doesn't go on holiday.

I hope you're not suggesting that a 'proper contracting accountant' doesn't go on holiday...

[Wanderer]

Trying to get my first month of 2014 free of infractions.

Reported....

[northernladuk]

Don't want to be rude... Hang on whats happened to NLUK in 2014

I never want to be, just how it comes out LOL. Trying to get my first month of 2014 free of infractions. Normal service will unfortunately be resumed in the very near future I expect.

Either that the increased dosage of my medication might be working!

[kal]

Don't want to be rude but your accountant is there to provide a service, not run your business for you. You should be researching and understanding the basics yourself first. There is more than enough information out there about directors loans and dividend payments (bearing in mind it is the basic way over a million people run their business's) to help answer your question and teach you a ton of stuff you are not aware you don't know.

Don't want to be rude... Hang on whats happened to NLUK in 2014

[northernladuk]

I'm new to contracting - have a question as my accountant is still on bloody holiday.

Can my dividends be declared / paperwork sorted once a year or does it have to be done at point of taking them?

Also - if I did this (directors loan I know) can I just offset this at year end as a dividend? I.e the money that would have been paid to me as a div in the first place but is no longer in my account.

Thanks for your help.

Don't want to be rude but your accountant is there to provide a service, not run your business for you. You should be researching and understanding the basics yourself first. There is more than enough information out there about directors loans and dividend payments (bearing in mind it is the basic way over a million people run their business's) to help answer your question and teach you a ton of stuff you are not aware you don't know.

[Wanderer]

You could tell your accountant once per year that all the withdrawals you made were dividends declared on the days you withdrew them and have them sort it out then, but there is a lot of scope for things to go wrong, and if you take more than the profit you had available you'll be back in a loan situation for some of the withdrawals. Keeping accurate records during the year will be very difficult.

Agreed.

The accountant is probably OK squaring up the accounts once a year, I used to work like that years ago but it leads to poor planning and often incurs unexpected tax bills that could have been avoided with a bit of planing. It turns out that declaring dividends in a directors meeting at the ATM beside the kebab shop on a Saturday night wasn't such a great way to run a company.

If you are paying your accountant more than about £500/year then they should be supplying some sort of book keeping system that gives you a real time view of your company position. Typically you or them would spend a few minutes each month entering invoices and expenses and then get a real time calculation of how much retained profit can be paid out as a dividend (I like to enter the details myself and let the accountant check it for me). You can then use the templates for a dividend voucher and meeting minutes and keep a running total to understand if the dividends/salary paid so far have used up the current year's tax allowance so the shareholders can avoid higher rate tax if they choose.

There are lots of online systems that do this, Xero, FreeAgent and others - try a search of the forum. Some accountants will supply a subscription to one of these packages as part of their monthly fee, others like InTouch appear to have their own custom portal that you can use. SJD offer a low tech option with excel, Dividend Voucher and other templates which you can download for free - you don't have to be one of their customers.

It will also impress HMRC if you have all your books in order if they ever come to audit you...

[ASB]

Dividends can only be declared out of profits that you know your company to have earned, and which haven't been distributed as dividends before.

It is best to make declarations at the time you withdraw the funds and ensure you notify your accountant who will hopefully be keeping records and able to advise you at any point on how much profit is available to take as dividends.

Declaring a big dividend once per year means that you will almost certainly have had a director's loan in excess of £5,000 at some stage in the year - HMRC deem that you are "onto a good thing" by having such a loan and it will be a taxable benefit in kind (like a company car) unless you pay your company interest at the HMRC rate. There can also be Corporation Tax surcharges.

You could tell your accountant once per year that all the withdrawals you made were dividends declared on the days you withdrew them and have them sort it out then, but there is a lot of scope for things to go wrong, and if you take more than the profit you had available you'll be back in a loan situation for some of the withdrawals. Keeping accurate records during the year will be very difficult.

The bik tax is based on the difference between the official rate of 4 pc and what is paid. It is also subject to class 1 ni. Of course paying the interest makes this go away. I am sure some people perhaps roll up the interest onto the loan. [I do not believe this would be good enough to get rid of the bik si c I believe it must actually be paid not just charged]

I assume the ct issue you refer to is the s455 tax if the loan is not repaid on time. You do get it back.

[YesMan]

Dividends can only be declared out of profits that you know your company to have earned, and which haven't been distributed as dividends before.

It is best to make declarations at the time you withdraw the funds and ensure you notify your accountant who will hopefully be keeping records and able to advise you at any point on how much profit is available to take as dividends.

Declaring a big dividend once per year means that you will almost certainly have had a director's loan in excess of £5,000 at some stage in the year - HMRC deem that you are "onto a good thing" by having such a loan and it will be a taxable benefit in kind (like a company car) unless you pay your company interest at the HMRC rate. There can also be Corporation Tax surcharges.

You could tell your accountant once per year that all the withdrawals you made were dividends declared on the days you withdrew them and have them sort it out then, but there is a lot of scope for things to go wrong, and if you take more than the profit you had available you'll be back in a loan situation for some of the withdrawals. Keeping accurate records during the year will be very difficult.

[ASB]

I'm new to contracting - have a question as my accountant is still on bloody holiday.

Can my dividends be declared / paperwork sorted once a year or does it have to be done at point of taking them?

Also - if I did this (directors loan I know) can I just offset this at year end as a dividend? I.e the money that would have been paid to me as a div in the first place but is no longer in my account.

Thanks for your help.

So you want to take random amounts of money and sort it out later?

It's ok. Those are loans and duly booked in the accounts. Dont forget the potential bik issues and companies act issues.

Dividends declared a d paid once year and that covers it.

there is nothing intrinsically wrong with this. But it is not partivularly prudent. There is a lot that could go wrong. What if you take too much and dont have the profit to cover it?

So to be safe you mudt have a decent idea of the financial position. If you have this then you should know a level of dividends which is safe.

[Sausage Surprise]

Get yourself a proper contracting accountant that doesn't go on holiday.
You need to work out VAT, Corp Tax, expenses, etc so you can work out your profit before taking any divis.

[ladams215]

I'm new to contracting - have a question as my accountant is still on bloody holiday.

Can my dividends be declared / paperwork sorted once a year or does it have to be done at point of taking them?

Also - if I did this (directors loan I know) can I just offset this at year end as a dividend? I.e the money that would have been paid to me as a div in the first place but is no longer in my account.

Thanks for your help.