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Declaring dividends in self assessment tax returns

Suppose a company has declared divideds for the company's financial year ending Jul 2011. As a share holder(could be the director of the company or just individual share holders), during which tax year's returns(self assessment) do I need to show these dividends, will this be for the 2010 - 2011 year or 2011 - 2012 year?

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Date of dividend

The tax year in which the date of payment of the dividend falls.  The company's accounting year is irrelevant.

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When paid

The dividend is taxable when it's paid.

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Worried now..

I wrote to my accountant and this is what she says - " The dividends need to be stated on the self assessment tax return for the year they were declared, not the year they were actually received."

Am I in safe hands :-( with them.

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Unsafe hands

urstop wrote:

I wrote to my accountant and this is what she says - " The dividends need to be stated on the self assessment tax return for the year they were declared, not the year they were actually received."

Am I in safe hands :-( with them.

Your accountant's statement is at best poorly worded and at worst, downright misleading.

 

Why post this question on here if you have an accountant? surely he should be the first port of call for queries of this nature???

Evidently, she was.

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Declared, paid & received

I think there may be some confusion here.

As far as your personal tax position is concerned the company's accounting year is not a consideration in relation to your income tax liabilities (if any) on the dividends.

It may be the case that when the company declares a dividend the amount due to you is credited to a director's loan (or current) account you have with the company in the company's 'books'.  If so then you may not yourself see any money at that stage - there may be no payment into (for example) your personal bank account.

However the dividend is regarded for tax purposes as paid to you, and received by you, when it is credited to that director's loan (or current) account in the company's 'books'.  So that is the date of payment of the dividend and the dividend needs to be shown on your tax return for the tax year in which that date falls.

The company might actually pay money to you on a different date, or on lots of dates.  Some of those dates might be before the date of the dividend and some might be after.  But those dates are not relevant to the dividend and the tax on the dividend.

Does that help?

David

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dividends paid date

Dear david,

I am always shocked at how many times this matter is used as an avoidance technique.

Where an OMB company prepares accounts the effective date of any journal by the accountants preparing the company accounts and personal tax return would be either:

a)the year end date

b)the date on the dividend resolution/notification

c)the date of the dividend payment as notified in the accounts

Regretably I have not seen standard practice here or appreciatiobn of the importance and relevance of this information being documented/published.

 

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Hmrc guidance on dividends

davidwinch wrote:

I think there may be some confusion here.

As far as your personal tax position is concerned the company's accounting year is not a consideration in relation to your income tax liabilities (if any) on the dividends.

It may be the case that when the company declares a dividend the amount due to you is credited to a director's loan (or current) account you have with the company in the company's 'books'.  If so then you may not yourself see any money at that stage - there may be no payment into (for example) your personal bank account.

However the dividend is regarded for tax purposes as paid to you, and received by you, when it is credited to that director's loan (or current) account in the company's 'books'.  So that is the date of payment of the dividend and the dividend needs to be shown on your tax return for the tax year in which that date falls.

The company might actually pay money to you on a different date, or on lots of dates.  Some of those dates might be before the date of the dividend and some might be after.  But those dates are not relevant to the dividend and the tax on the dividend.

Does that help?

David

I'm struggling to find any guidance on this on HMRC website. Can point me in the right direction?

Thanks

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???

Why post this question on here if you have an accountant? surely he should be the first port of call for queries of this nature???

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Dividends

There should be minutes of a meeting at which the dividend is declared and these minutes should say when it is payable. That is the relevant date for Tax Return purposes. The date of payment should also be on the dividend voucher.

I am, of course, assuming that dividends are properly declared and minuted and there is no "fudging" after the accounts have been prepared!!! 

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dividends paid date

I completely understand where Urstop is coming from on this. I have always thought that the dividend is declared in the tax return following the meeting of the shareholders and the issuing of the voucher as this contains information regarding the tax credit without which a shareholder filing there own tax return would not know.

 

Many companies have late expenses from the director to go in and set against payments made to them during the course of the financial year, therefore, I would hesitate to state the total received as a dividend based upon the amount and date, due to the tardy state of the directors expense account, not to mention the late processing of their payroll.

 

So, if it hasn't been answered already, enter the dividend into the tax return using the voucher following the shareholders meeting and make sure this is done as soon as practicable following the end of year accounts.

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