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Dividends for Sole Director Company

A lot of posts on here have debated the issue of directors from small sole trader companies drawing funds during the year as dividends but leaving all the paperwork to the end of the year.

Has anyone had any actual dealings with the revenue on this matter as often the paper trail is sketchy and most directors would argue that the drawings we legal at the time taken.

If the funds were available to distribute in the company I can't see why it could be argued that it is a loan rather than dividend - obviously when more that one director is involved then things begin to get more complex.

I was hoping someone with actual experience of this being challenged could share their experience.


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Company Law is enough
Blimey this site’s weird where’s everyone’s name gone….I like my name, what the prob?

Hi – whoever you are. There is no mystery to this, the whole topic as well as HMRC’s approach revolves around company law. When an owner/director takes money out of the company there will always have to be some document to say what it was, eg expense claim, payslip, minute of a dividend, “I’m off don’t expect me back” etc etc. If there’s no document then it’s logical to assume it’s been taken on account of something later, ie a loan (or it's to do with bad advice from the accountant)

Just because there’s no company law officer standing over you (as there would be a PAYE officer for salary & benefits) doesn’t mean you don’t have to do it right.

What’s so daft in all the “who’s to say we didn’t draw the dividend paperwork up at the time” questions is that dividends are so easy to record at the time, even a client can understand and do them. They can even work out what their income less expenses less 20% is roughly to get an idea of what’s in the kitty, before filling out a simple minute & signing it.

For the horses mouth look at HMRC’s manual on dividends

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