Dividend Question

Dividend Question

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I am getting confused by all I have read on dividends.

If my company has a year end of 31.3.17 and I decide on a final dividend of £5000 , crediting the directors loan account and debiting dividends.  I then pay the dividend in Nov 17.  Which tax return does this dividend get declared on.  Will it be 2016 to 2017 or do I declare it on next years return.

I am confused whether a credit to the directors loan account is taken as actual payment date or if it is the actual date the payment eventually went through the bank account itself.

Thank you.

Replies (9)

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By Ruddles
17th Nov 2017 22:01

I’m sure that your accountant will be able to explain everything.

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By andy.partridge
17th Nov 2017 22:52

Reveal yourself and I will help.

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By I'msorryIhaven'taclue
17th Nov 2017 23:11

Single man, reveal yourself .
Let Northerner see hotpot.

footnote: I know you're not one of them, Andy.

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Replying to I'msorryIhaven'taclue:
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By andy.partridge
17th Nov 2017 23:36

I've absolutely no idea . . .
It sounds a bit Kevin Spacey.

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By D V Fields
17th Nov 2017 22:54

Good advice from Ruddles. Should you wish to ignore it; then think about the answer yourself. What is a dividend? Who decides it? Who approves it? Who is entitled to it? When is it to be paid? Refer to the Companies Act for clarity.
If you are still unsure, refer to the above.

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By I'msorryIhaven'taclue
17th Nov 2017 23:06

I'm delving for a thread from a dozen years ago in which this topic was given an airing. I'd linked to a HMRC example / illustrative case in one of their helpful brochures which had included the specific example, and allowability, of a salary (and, for that matter, a bonus) payment posted (but not physically paid - helllo, OP, are you keeping up?) via notional DR / CR to a DLA.

Unsurprisingly, that illuminative example disappeared from HMRC's helpful brochure radar shortly afterwards.

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By pumnoo
18th Nov 2017 00:51

Date of the dividend payment for the purpose of tax is neither when it is declared nor when it is paid. Instead, it is the date when it has become DUE AND PAYABLE.

For example company of YE 31/03/2017 declares dividend payment in its AGM on 03 04/2017 to be payable on 01/05/2017. But the dividends were actually paid in 01/11/2017. The date of payment will be 01/05/2017 (the date when it is DUE AND PAYABLE).
Normally it is the date when company records the transaction in its accounts.

In your scenario the date of declaration and date when it is DUE AND PAYABLE is same. Therefore it will be deemed as paid on 31/03/2017 (i.e. in FY2016/17) for tax purpose. Actual payment date is irrelevant.

Please note the rules re interim dividends are different because interim dividends may be varied or rescinded in later time. Therefore for them the date of dividend payment is ACTUAL PAYMENT DATE.

I hope it helps.

Kind Regards

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Replying to pumnoo:
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By GR
18th Nov 2017 08:55

Quote:

Date of the dividend payment for the purpose of tax is neither when it is declared nor when it is paid. Instead, it is the date when it has become DUE AND PAYABLE.

For example company of YE 31/03/2017 declares dividend payment in its AGM on 03 04/2017 to be payable on 01/05/2017. But the dividends were actually paid in 01/11/2017. The date of payment will be 01/05/2017 (the date when it is DUE AND PAYABLE).
Normally it is the date when company records the transaction in its accounts.

In your scenario the date of declaration and date when it is DUE AND PAYABLE is same. Therefore it will be deemed as paid on 31/03/2017 (i.e. in FY2016/17) for tax purpose. Actual payment date is irrelevant.

Please note the rules re interim dividends are different because interim dividends may be varied or rescinded in later time. Therefore for them the date of dividend payment is ACTUAL PAYMENT DATE.

I hope it helps.

Kind Regards

I have recently been involved in a discovery assessment for a personal tax return due to differences in dividends as per accounts and as per personal tax returns.

HMRC were only interested in the payment date as per the dividend voucher (not bank statement date).

They didn't bother looking into whether or not the dividends were final or interim.

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By Matrix
18th Nov 2017 09:32

I would expect that, unless you decided on the final dividend before 5 April then the dividend would be declared in the following tax year. If it is a final dividend then I expect you would have had sight of the reserves, so the accounts had been prepared to 31 March and this was after 5 April.

If, however, you declared the dividend, prepared the dividend paperwork and booked the dividend to the Director loan account before 5 April 2017 then the dividend would be included in the 2016-17 tax return.

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