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one man band company and monthly dividends?

one man band company and monthly dividends?

I have a client who is drawing min salary £624 per month and then taking a dividend every month.  I know HMRC would say "tut tut" but can they do anything about it?

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10th Jan 2013 08:28

HMRC don't tut tut

This is common practice amongst busineses (and their accountants).

The important thing though is to make sure there's a minute/resolution and dividend voucher to evidence the dividends and that the director(s) can show that there are sufficient post tax profits available to support them every time they are paid.

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By imbs
10th Jan 2013 10:17

Thanks for this too Paul

A lot of my clients do quarterly or ad hoc dividends. I was just worried the monthly approach was just a little too blatant and just asking for trouble. But as far as I know, HMRC may not like it but at the minute there is no legislation against it? So if they ever come asking I can say "well whatcha gonna do about it?"

I know they are wanting to change it but havent got around to it yet...

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10th Jan 2013 10:50

Not up to them really...

...it's company law that allows shareholders to draw dividends however, if I was in charge, I'd just bring dividends into charge of NI !  But I'm not.

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By imbs
10th Jan 2013 10:59

That would

make life a lot easier for us!

Thanks again

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By JAADAMS
11th Jan 2013 14:30

Read this article on Dividends...

... I wrote an article on this as below ....

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

...it states:

HMRC are increasingly contending that such dividends are in reality earnings under the s62 ITEPA 2003 (salary sacrifice) rules and to persuade them otherwise needs proof that a set procedure for the declaration of dividends has been followed.

...so at least put a set procedure in place as the article suggests.

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