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Dividend paperwork

I am in the camp that dividend paperwork should be drawn up at the time of voting but having recently been advised that this may not be teh case.

If it is the case that amounts drawn as dividend - say a £20k lump sum - is drawn as a dividend - eneterd in the books as a dividend but the minute and dividend warrant is drawn up later - I have been advised that the paperwork can be "regularised" (that's what the lawyer in the acqusition case we were looking at stated) at a later date

So, my question is - and really thinking of this as an advance defence for those clients who use the company money as their own - if it is discussed/minuted/noted in advance that monthly/quarterly - a dividend will be voted of (say) £7500 per quarter or £2500 per month and that this will happen every qtr/mth as long as the company trades on its current profit levels, and that these will be credited to a loan account and this will continue until such time as the subject is revisited  - will that - coupled with the paperwork being drawn up subsequently, suffice should HMRC come knocking.

Any thoughts welcomed

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What will the subsequent 'paperwork' say?

Will it refer to a meeting that took place or didn't take place? If the former is the intention that it should override the resolution made in year 0, rendering it redundant? If the latter is it referring to a resolution that is already in existence rendering the new paperwork redundant?

Not meaning to be pendantic, just confused!

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By JAADAMS
27th Feb 2013 18:37

This might help you...

Many believe that backdating documents to confirm consideration of profit and payment of dividend is a paperwork tidying up exercise but technically it is fraud (see ‘Back dated dividends (again) – 12.06.2008 and ‘First Global Media Group Limited v Larkin [2003]’ EWCA Civ 1765)

 ... from an article I wrote on Dividends a couple of years ago now. You might like to look at the full text.

It goes on to say... 'Dividends are treated as paid on the date the enforceable debt is actually created' etc etc

http://www.accountingweb.co.uk/topic/tax/dividends-checklist-get-details-right/470525 

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By Old Greying Accountant
27th Feb 2013 19:57

There is ...

... a big difference between

a sole director taking £10,000 from the company, in the knowledge that the cash at bank plus debtors and stock exceed creditors (including an estimate of CT), and writing dividend on the cheque stub; and,a dividend being voted to cover hundreds of items of personal expenses paid willy nilly through the year by cheque from the company bank account, cash from the till, and expenditure using the company credit/debit cards!

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It's no great hardship to do a minute

I'm not sure I see the need to add uncertainty and, in some cases, risk into a simple procedure, ie to draw up a monthly written res to confirm available profits and the quantum of the div.

Yes, as discussed in a recent thread, if a director was not educated properly but was sure s/he was drawing a div each month, it's OK to confirm in writing after the event, that then, my view is do it as it happens.

The other aspect to this is that it reminds directors of the importance of distinguishing div drawings and allocations from other kinds of drawing.

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By Old Greying Accountant
27th Feb 2013 21:55

Don't disagree ...

... but there are those where it is akin to striking ones cranium against a partition comprised of London's finest NFP clay stock!

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