Deferring dividends on paper

Deferring dividends on paper

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Hi, I am paid via the dividends from my limited company, strictly speaking I am being paid £1000 a week by direct debit and this is then entered as an annual dividend. However I want to take a large one-off payment now (i.e. in May) to buy a home. It will be around £200,000 which will leave at least £1m in cash reserves left in the company. I discussed this with my accountant last month as I was looking to do it in early April just as the new tax year starts, and he mentioned that it was possible to declare half of the dividend for the last tax year (i.e. 14/15) and the rest for this tax year (15/16) in the accounts, thereby splitting the personal tax obligations over 2 tax years.

Sadly the house I wanted fell through so I did not take advantage of this back in April, but luckily somewhere else has come up recently and I want to buy it. So my question is, is this option of 'splitting' the tax year over 2 years still possible as we are in May-June now? Can it effectively be withdrawn at any time or will HMRC have issues with this as it's obviously way past early April?

I know i should ask my accountant but it's Friday evening and I wanted to put in an offer tomorrow so wanted to clarify this first. Thanks

Replies (6)

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By Marion Hayes
29th May 2015 19:19

Date of taxability

is the date of payment for the dividend whichever accounting year it is in respect of.

If you had paid one between 1st and 5th April, and the second after 5th April that would have worked but it is too late now.

However, you will have between now and 5th April to think of any mitigating effects you could create such as pension contributions or EIS investments.

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By Matrix
29th May 2015 19:27

Did he also mention that while it was possible to split between two tax years that the dividend had to be paid by 5 April to be included in 2014/15?

I am sure he did mention this.

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By phatwa
29th May 2015 19:34

I'm pretty sure she said there was some leeway in paying it, but I wanted to clarify what it was. But since it's at best only a few days it doesn't look like I can take advantage of this now we are entering June. Thanks anyway.

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By Matrix
29th May 2015 19:41

Your accountant has changed from a he to a she!

No it is too late to declare a dividend for 2014/15 now, you should have done it while you were thinking about it.

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By phatwa
29th May 2015 20:51

It wouldnt have made sense to do it then because the house sold to someone else very quickly.

Thanks anyway.

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By Stuart.thomson
31st May 2015 09:51

I would suggest you could do something this year to defer tax on receit of the dividends. However this will be splitting into next tax year. Either dividends as your accountant suggested or pay a dividend this year and take out a loan which you repay on 6.4.16 with a dividend.. There may be a s455 charge on the loan if the CT tax return ( filed 9 months post y/e) is filed and the loan is outstanding (ie loan not repaid by dividend repayment). Anyway discuss with your accountant.

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