Paying Dividends

Paying Dividends

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Co has been trading for three years, 1 shareholder/director.

Financial year 31/05/06 - no retained profits, estimated pbt 20k for year to 31/05/07 (contract based)

Director has paid himself 8k from the company bank account today as an interim dividend from current year profits. At the moment there is no paperwork to back up this transaction.

Can someone advise on what paperwork should be in place or any relevant websites where I can find this info? tried HMRC - needle in haystack!

Thanks in advance.

Emma
Emma King

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Euan's picture
By Euan MacLennan
09th Oct 2006 11:14

Divi is £8,000
The dividend payment is £8,000, not £8,888.88.

The financial year is irrelevant. Dividends can only be paid out of retained profits after tax, not out of the profits of a particular year if there are accumulated profits brought forward. The only relevant date is the date of payment, which determines both the company's financial year in which the divi will be disclosed and the tax year for which the director will have to include the income.

You might wish to disclose the rate of dividend (£4,000 per share) on the voucher. It makes it easier where there are several shareholders with different shareholdings just to quote the rate on the Minutes.

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By emmaking10
09th Oct 2006 10:45

Voucher / Minutes
Thanks Richard.

I've sourced a couple of samples by googling!

Could anyone confirm if the following will suffice:

One shareholder-director with 2 x £1 share. Withdrawn 8k from bank.

Therefore he has a meeting with himself and prepares minutes stating that the company will pay an interim dividend of £4444.44 per £1 ordinary share on 6th Oct to the shareholders registered on 6th Oct.

Dividend Voucher
No of shares = 2
Dividend Payment = 8888.88
Tax Credit = 888.88

Financial year end is 31/05/07 - Am I correct in thinking that the minutes and dividend voucher should state the date the dividend is paid but also the financial year to which it relates?

Also - what happens to the 10% tax credit - assuming this should be paid to HMRC how and when should this be done?

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By User deleted
09th Oct 2006 10:56

"notional" tax credit
Hi Emma - the 10% tax credit on the dividend is purely "notional" - it is not paid over. in the directors sa return he would declare the gross dividend (chargeable at 10% if not a higher rate payer or 32.5% if in higher rate bracket)LESS the tax credit. therefore, if not a higher rate payer the tax credit is sufficient to cover his liability.

Also, you need to state the financial year for which dividends are being paid on both the board minutes and the dividend voucher.

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By AnonymousUser
09th Oct 2006 10:13

Two Key Documents........
Should be evident and in place when voting a dividend........

1. Dividend vouchers in the name of the recipient detailing the amounts invlolved and divi per share. This should be in place for each shareholder if there is more than one and should be signed by the company and shareholder. The period to which it relates ie. interim/final. Any person not taking a dividend but who is entitled to do so should sign a dividend waiver form highlighting their right to waiver receipt of any dividend. The dividend voucher should also show the amount of notional tax involved (10 % of the gross dividend)

2. Minutes of the meeting of the board of directors detailing the above dividend and amounts etc.

Maybe some one can give you a website for some pro-forma's........

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By Malcolm Veall
12th Oct 2006 11:08

Mention Available Profits
If you are paying interim divis out of profits of the current year I would suggest that the fact that the availability of profits has been estimated shold be documented. This could be a file note but it would be better if it were mentioned in the director's meeting minute.

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By kedgley
26th Jan 2007 16:14

could you send one to me?
Hi David,

Could you send a voucher and board minute to me?

[email protected]

Thanks

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By daymar
11th Oct 2006 14:55

Examples
If it helps, I would be happy to send you an example of a Dividend Warrant and a Board Minute which meet the requirements.

David Pugh
Daymar Ltd.

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Replying to mhtax:
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By mojo morley
09th Nov 2012 11:18

Dividends

  David       I  would be very grateful if you could forward an example of a Dividend warrant and example of Minutes of the Board Meeting authorising .

Many thanks

John

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