how often should you pay dividends?

[Gonzo]

But that sounds like you're falsifying company documentation to avoid a tax investigation. It may well avoid the investigation but if you then get investigated for other reasons, they'll see your weekly £500ish payment and a false single dividend declaration at the beginning / end of year, and you may find yourself in difficulties.

Dividends do not have to be paid at the same time as they are declared.

There must be sufficient profit in the company when the dividend is declared, but it can be drawn down in stages if required. Large companies declare their dividends well in advance of when they get paid out.

[Old Greg]

Which is my point - provided you state in the company minute book that a distribution of £26,000 will be made on 31st March 2007, the taxman will probably be happy with that as opposed to looking at the company bank statements to see a weekly withdrawal of £500.

But that sounds like you're falsifying company documentation to avoid a tax investigation. It may well avoid the investigation but if you then get investigated for other reasons, they'll see your weekly £500ish payment and a false single dividend declaration at the beginning / end of year, and you may find yourself in difficulties.

[BA to the Stars]

Which is my point - provided you state in the company minute book that a distribution of £26,000 will be made on 31st March 2007, the taxman will probably be happy with that as opposed to looking at the company bank statements to see a weekly withdrawal of £500.

[max]

Question:

Other than an inspection of bank statements, how would Hector know the frequency of dividends.

Answer:

Just make sure that distributions are minuted accordingly and that all associated paperwork is in order.

[BA to the Stars]

Other than an inspection of bank statements, how would Hector know the frequency of dividends. As Jog On states, if profits have already been calculated, theoretically you could take dividends on a daily basis (although would be unwise). Just make sure that distributions are minuted accordingly and that all associated paperwork is in order.

[Jog On]

the taxman may decide that routine and consistent dividend payments are actually salary and will ask you for the back tax due on them.

If they do what's the odds of them winning? When people say that you can take them whenever you want as long as it's out of company profit does that mean that the law states that Hector can only ask/demand that it be taxed as PAYE?

In my new gig now I've worked out how much I have available in profit after all tax/expenses/salary etc and am taking divis very regularly just while I get on top of my debts etc and can afford to take them less often.

I've heard that it's one thing for Hector to 'ask' and another thing for the courts to empower them to demand. For them to 'decide' that regular divis are in their eyes salary payments and all liable to PAYE isn't that akin to an IR35 investigation?

With a well worded contract and PCG membership is this something to be concerned about when paying very regular divis? My payments are all after expenses/tax/salary and referenced as such on the bank payments.

Should I be worried if I'm taking them twice monthly?

[young veteran]

cheers for that gents

[thunderlizard]

Remember dividends are a distribution of profit, so when you declare a dividend of say £1m you need to be pretty darn sure that it will have made at least £1m profit, plus corp. tax considerations, before the year's out. If you're paying dividends out of past years' retained profit, that's OK - otherwise you're taking a risk. That's the main factor that will drive the frequency and size of the payments.

[malvolio]

thanks Jon, but ive done alot of searching and reading on this and its just not clear and i keep hearing different things from different sources.

Yeah, it's such a pain when you have to make your own decisions, isn't it - the joys of running your own company, eh...?

You pay your accountant for advice and guidance, so why do you need to second-guess him? Reality is you can pay divis as often as you like: however, if you get into a PAYE investigation, the taxman may decide that routine and consistent dividend payments are actually salary and will ask you for the back tax due on them. For that reason many people take them irregularly, or quarterly, and align them to expected profits, but it is really not all that important. And if you don't get investigated, it makes no difference anyway.

[young veteran]

thanks Jon, but ive done alot of searching and reading on this and its just not clear and i keep hearing different things from different sources.

[JonSmile]

Welcome to the boards..

Did you bother to search the forums?

Have a look here...

http://forums.contractoruk.com/thread18871-monthly.html

Sorry to sound short but it's late!

Jon

[young veteran]

Hi All,

May accountants have advised me to pay mysekf a basic wage of £750 a month and whatever dividens i would like up to £2000 monthly. Is this regular practice ? can anyone tell me the pros and cons about this, and the consequences regading taxman etc?

Thanks for your help in advance.

i know wrong section - dam newbies!