Reply to: Umbrella employee taking dividends from dormant company

[ladymuck]

All the articles say you can..you just lose dormant status.

Yeah, I guess that's the distinction. I was looking at it from the PoV that you'd want to retain dormant status.

[northernladuk]

I have to say, I'm very surprised that a dormant company can pay a dividend and CoHo not consider that a significant transaction.

All the articles say you can..younjust loose dormant status.

[ladymuck]

I have to say, I'm very surprised that a dormant company can pay a dividend and CoHo not consider that a significant transaction.

[northernladuk]

A quick search of these forums would have answered this. Asking people to do a search isn't that stupid after all..

https://www.contractoruk.com/forums/...dividends.html

That said...

Every single article in this search, bar none, says you can't without losing dormancy status.

dividends for dormant company - Google Search

Are you absolutely sure every one in the loop is completely clear you mean a proper dormant company and just not a not trading one. Nearly every single thread we get on dormancy gets this wrong.

[Dib]

Update

I spoke with my accountant and it turns out that YOU CAN withdraw dividends during dormancy, as long as you have enough funds to do so.

You cannot:

1) Claim expenses (apart from dormancy fees and bank charges)
2) Contribute to a pension
3) Receive a salary
4) Pay other employees (if you have any)

The dividends will be added to your SATR along with the P60 figures and you have to pay dividend tax as normal, in two instalments.

To close the loop, I also called HMRC and asked.

[ladymuck]

mmhm information online is confusing and I would not trust unverified statements on random websites. I have found sites that say that you can withdraw dividends and pay into a pension and be dormant. Other say the opposite.

As I said, I will wait for my accountant to get back to me. I just thought I'd post it on here, in case anyone had some experience with this.

I guess this isn't good enough either?

Dormant companies and associations: Dormant for Companies House - GOV.UK

Dormant according to Companies House

Your company is called dormant by Companies House if it’s had no ‘significant’ transactions in the financial year.

Significant transactions don’t include:

filing fees paid to Companies House
penalties for late filing of accounts
money paid for shares when the company was incorporated

I'd say paying a dividend is a significant transaction.

I shared the other "random" site because it went into more detail and you were willing to ask the opinion of a "random" internet forum.

EDIT:
If you log into your company on Companies House, and look at the Dormant Company filing you will see this, too:


No idea why images aren't displaying properly

[Dib]

You may want to check that assumption:
Dormant company: what must a company do to stay dormant?

mmhm information online is confusing and I would not trust unverified statements on random websites. I have found sites that say that you can withdraw dividends and pay into a pension and be dormant. Other say the opposite.

As I said, I will wait for my accountant to get back to me. I just thought I'd post it on here, in case anyone had some experience with this.

[ladymuck]

It is my understanding that a dormant company can release dividends. I am still waiting fro my accountant to get back to me. They are busy due to covid-19 issues. I will post a reply once I know for sure what can/can't do.

You may want to check that assumption:
Dormant company: what must a company do to stay dormant?

Dormant company definition for Companies House purposes

Companies House employ a more rigorous dormant company definition. They define a dormant company as one that has had no significant accounting transactions during the accounting period. A ‘significant’ accounting transaction is defined as one that the company should enter in its accounting records. Provided no such transactions occur during the financial period then the company can have dormant company status.

[Dib]

Hang on...

If the company is dormant, why is it paying a dividend? You do realise that by having a transaction go through the book you will have to produce full accounts for the year?

Or do you mean the company is live but you're just not using it?

Your PAYE income is separated on your SATR and you just plug in the numbers from the P60. You shouldn't have any residual tax to pay on this, unless the umbrella has screwed up.

Dividends are calculated separately at 0% for the first £2k then 7.5, 32.5, 38.1 as you hit each band.

It is my understanding that a dormant company can release dividends. I am still waiting fro my accountant to get back to me. They are busy due to covid-19 issues. I will post a reply once I know for sure what can/can't do.

[ladymuck]

Hang on...

If the company is dormant, why is it paying a dividend? You do realise that by having a transaction go through the book you will have to produce full accounts for the year?

Or do you mean the company is live but you're just not using it?

Your PAYE income is separated on your SATR and you just plug in the numbers from the P60. You shouldn't have any residual tax to pay on this, unless the umbrella has screwed up.

Dividends are calculated separately at 0% for the first £2k then 7.5, 32.5, 38.1 as you hit each band.

[Dib]

Thanks, I have asked my accountant but he is taking some time to get back to me...

[cojak]

No, we are not deleting this thread, there is good info for others to benefit from it.

[malvolio]

Thanks. This is informative.

I am aware I have to include them on my next SATR, but will they be taxed as dividends at 7.5, 32.5, 38.1 (depending on how much I take) or something different?

Ask your... oh, hang on...

They are dividends. Dividend taxation rules will apply. The SATR software will (or at least should!) apportion your annual income to the right bands; it will al ready have the umbrella company monies in there.

[Dib]

Why does it matter? Divis are paid from retained profits; AFAIK the company doesn't have to be actively trading to pay them. You will have to declare them on your next SAR of course.

The umbrella isn't involved at all, any more then MyCo is when I get a share dividend from Barclays.

Thanks. This is informative.

I am aware I have to include them on my next SATR, but will they be taxed as dividends at 7.5, 32.5, 38.1 (depending on how much I take) or something different?

[malvolio]

Why does it matter? Divis are paid from retained profits; AFAIK the company doesn't have to be actively trading to pay them. You will have to declare them on your next SAR of course.

The umbrella isn't involved at all, any more then MyCo is when I get a share dividend from Barclays.