Dividend Vouchers

Dividend Vouchers

Didn't find your answer?

With the introduction of the new dividend tax, is it still necessary to prepare dividend vouchers or notes of a meeting where agreement of payment of a dividend has been agreed?

Would HMRC really be interested in seeing them any more?

Replies (46)

Please login or register to join the discussion.

By johngroganjga
25th Apr 2016 19:26

I am not sure why you think the change in the tax rate affects the extent to which it is desirable or necessary to document decisions to pay dividends. What sort of reasons do you have in mind?

Thanks (0)
By Tim Vane
25th Apr 2016 19:33

What an odd question!

When I saw the question title I assumed it was going to be another "what should I include on a dividend voucher now there is no tax credit" post. I suppose in a way it's nice to be surprised.

Thanks (0)
By cheekychappy
25th Apr 2016 19:40

There's no point having them if there is no tax credit.

Thanks (0)
By johngroganjga
25th Apr 2016 19:45

The question is not just about dividend vouchers, it extends to minutes of meetings as well.

Thanks (0)
By cheekychappy
25th Apr 2016 19:49

Sorry John. I'll be more clear.

 

There's no point in having dividend vouchers or the minutes of a meeting. There's especially no need for minutes of a meeting when a meeting didn't take place as there would be nothing to minute. 

 

Why waste time on pointless exercises, eh?

Thanks (2)
Replying to lionofludesch:
RLI
By lionofludesch
26th Apr 2016 08:18

Loans

cheekychappy wrote:

Sorry John. I'll be more clear.

 

There's no point in having dividend vouchers or the minutes of a meeting. There's especially no need for minutes of a meeting when a meeting didn't take place as there would be nothing to minute. 

 

Why waste time on pointless exercises, eh?

I disagree. It's not just about the tax credit.   It's about documenting what the payment is for. It's a dividend, not a loan, not salary, not repayment of capital.

We're overlooking company law and implying that everything we do is for HMRC which is not the case at all.  The company is not the shareholders' personal piggy bank (though most of my clients think it is).  What happens if the company goes into liquidation ?  What evidence would there be that the money isn't repayable to the company ?

Thanks (3)
Replying to cheekychappy:
Jennifer Adams
By Jennifer Adams
05th May 2016 14:54

FYI here is an article written in checklist format about the legalities of dividend vouchers and whether minutes are necessary.
https://www.accountingweb.co.uk/business/finance-strategy/dividends-are-...
Re whether minutes are necessary:
"It seems obvious to state but minutes are only required if a meeting has taken place. Whether the dividend paid is interim or final no meetings are required under the Companies Act 2006 for private limited companies - no meetings equal no minutes."
Re Dividend counterfoils:
"Dividend vouchers are not in themselves a legal document. There is no mention of vouchers in the CA 2006 but one is required for tax purposes under s1104 CTA which states that if a dividend payment is made into a bank account then a certificate of tax deduction must be issued, “within a reasonable period”".

Thanks (0)
By johngroganjga
25th Apr 2016 20:50

I am inclined to agree in general, and always have done, but the question here is whether the change in tax rates has made any difference,

Thanks (0)
By cfield
26th Apr 2016 01:43

Still useful

Clients have come to expect dividend vouchers and they remain useful for showing the amount payable to each shareholder. I shall just enter £0.00 in the tax credit box and leave it at that. It's not strictly correct as the tax credit has been abolished, not reduced to 0%, but let's not split hairs and create unnecessary work.

Thanks (0)
By cheekychappy
26th Apr 2016 08:21

Loans

Just backdate the vouchers if necessary. Nobody will know.

Thanks (3)
Replying to An_a:
RLI
By lionofludesch
26th Apr 2016 08:27

Controversial

cheekychappy wrote:

Just backdate the vouchers if necessary. Nobody will know.

Controversial.   But you're probably right.

Thanks (1)
By cheekychappy
26th Apr 2016 08:38

Own up

I have been facetious.

I would of course provide dividend vouchers, or tell my clients to produce them. I would also minute any board meeting that had taken place.

 Unlike Cfield, I would not make reference to a tax credit that no longer exists.

Thanks (0)
Replying to An_a:
RLI
By lionofludesch
26th Apr 2016 09:16

Gosh!

cheekychappy wrote:

I have been facetious.

Gosh!

Who'd've thought it ?

 

Anyway, returning to the original question, how often have HMRC demanded to look at dividend vouchers to confirm the tax credit ?

I'd be surprised if anyone could come up with an instance.

Thanks (1)
Replying to lionofludesch:
avatar
By pawncob
26th Apr 2016 10:46

Whippersnappers!

lionofludesch wrote:

cheekychappy wrote:

I have been facetious.

Gosh!

Who'd've thought it ?

 

Anyway, returning to the original question, how often have HMRC demanded to look at dividend vouchers to confirm the tax credit ?

I'd be surprised if anyone could come up with an instance.

 

I'm old enough to remember when all dividend vouchers had to be submitted to the Inland Revenue to support a repayment claim!

 

Thanks (0)
Replying to An_a:
By cfield
26th Apr 2016 09:53

Tax credits on dividends

cheekychappy wrote:

Unlike Cfield, I would not make reference to a tax credit that no longer exists.

Well I suppose you could always put "not applicable" instead, or add a footnote, but the client would probably understand better if you just put zero. Not that many clients ever took much notice anyway.

Remember, the vouchers are not required by law. As others have said, their sole purpose is to document the payment, so there is no scope for argument later over what it was. Each to his/her own here I think. Personally, I'd rather save myself the extra work of revamping the vouchers for each client.

Interestingly, I saw some dividend vouchers from another accountant the other day (a fairly sizeable high street firm) and was slightly amused to see that they still refer to the Inland Revenue!

Thanks (1)
Replying to lionofludesch:
RLI
By lionofludesch
26th Apr 2016 10:57

Gone

cfield wrote:

Well I suppose you could always put "not applicable" instead, or add a footnote, but the client would probably understand better if you just put zero. Not that many clients ever took much notice anyway.

Why refer to them at all ?

They've gone!

There's any number of defunct taxes that are "not applicable" - Purchase Tax, Wig Powder Tax, Window Tax, Poll Tax .......

Thanks (0)
Replying to New To Accountancy:
By cfield
26th Apr 2016 11:28

Each to his own

lionofludesch wrote:

Why refer to them at all ?

They've gone!

I told you - because it would be a lot of work to revamp the vouchers for every single client and no one gives a monkey's anyway. Nor does it matter.

That high street firm I mentioned earlier don't seem to have come to any grief because they still refer to the Inland Revenue on their vouchers.

Look Lion, I don't tell you what to do in your practice, kindly desist from telling me what to do in mine. This thread was about how we deal with vouchers now that the tax credit has been abolished. Just look at the various answers, plough your own furrow and leave it at that.

Thanks (1)
Replying to Hugo Fair:
RLI
By lionofludesch
26th Apr 2016 13:10

Desist ?

cfield wrote:

Look Lion, I don't tell you what to do in your practice, kindly desist from telling me what to do in mine. 

I don't remember telling you to do anything.

Thanks (0)
Replying to Tax Dragon:
By cfield
26th Apr 2016 13:45

More tears

lionofludesch wrote:

I don't remember telling you to do anything.

Stop crying!

Do you want to share the tissues? Shall I bring them with me to the Slug and Lettuce?

Thanks (0)
By johngroganjga
26th Apr 2016 08:50

Back to the question

There is of course a range of reasonable opinion about how fastidious it is necessary or desirable to be about documenting dividend payment decisions. 'Twas ever thus. I myself tend towards the laissez faire school, except when it is a case of a dividend being paid by book entry rather than a cash payment, when I am adamant that there has to be a contemporaneous written record of the decision to pay it.

But, again, that is not what this question is about. What this question asks is whatever one's position was before 6 April 2016 should it be any different now that the rates of tax on dividends have increased.

I can see no reason whatever to change one's views in response to the change in tax rates, but perhaps I am missing something.

Thanks (0)
avatar
By whatdoyoumeanwashe
26th Apr 2016 09:29

I have a few clients who, despite my protestations, insist on making no reference to "salary", "dividend", "expenses" or "loan" in any payments from company to themselves, thinking they can decide later which should be which. These are the ones who ought to be doing their dividend vouchers meticulously. Most of the culprits are qualified accountants themselves!

Thanks (0)
Replying to AJS82428484:
avatar
By nogammonsinanundoubledgame
26th Apr 2016 09:41

Ha ha

whatdoyoumeanwashe wrote:

I have a few clients who, despite my protestations, insist on making no reference to "salary", "dividend", "expenses" or "loan" in any payments from company to themselves, thinking they can decide later which should be which. These are the ones who ought to be doing their dividend vouchers meticulously. Most of the culprits are qualified accountants themselves!


I suppose that is one step better than listing it as salary and then later "deciding" that they were dividends :)

 

Thanks (2)
Replying to Wilson Philips:
avatar
By whatdoyoumeanwashe
26th Apr 2016 09:44

That too!

nogammonsinanundoubledgame wrote:

I suppose that is one step better than listing it as salary and then later "deciding" that they were dividends :)

Yes, I've seen that too, although my accountant-clients tend to know better than to do that!

 

Thanks (0)
Replying to lionofludesch:
avatar
By BrianNicholls
27th Apr 2016 11:25

Doesn't RTI put a stop to that?

It can't be salary if you've not already sent the FPS to HMRC, surely.

Thanks (0)
Replying to BryanS1958:
paddle steamer
By DJKL
27th Apr 2016 11:37

Surely depends

BrianNicholls wrote:

It can't be salary if you've not already sent the FPS to HMRC, surely.

Surely depends if at a quantum that a payroll registration, submitting within RTI ,is required. ( if no other employees beyond directors )

Thanks (0)
Replying to BryanS1958:
RLI
By lionofludesch
27th Apr 2016 11:53

Late

BrianNicholls wrote:

It can't be salary if you've not already sent the FPS to HMRC, surely.

Can an FPS not be late ??

If not, how can anyone get a penalty for a late FPS?

Thanks (0)
RLI
By lionofludesch
26th Apr 2016 10:53

Me too

.... but not the new-fangled non-repayable ones.

Thanks (0)
By cheekychappy
26th Apr 2016 11:34

Cfield

Stop crying.

Thanks (4)
Replying to Paul Crowley:
By cfield
26th Apr 2016 11:46

I can't

cheekychappy wrote:

Stop crying.

I've still got a whole box of Kleenex to use up yet :-)

Thanks (0)
Replying to Paul Crowley:
By cheekychappy
26th Apr 2016 11:50

Stripper

cfield wrote:

cheekychappy wrote:

Stop crying.

I've still got a whole box of Kleenex to use up yet :-)

 

You have been reading the stripper thread too often.

Thanks (1)
Replying to paulhammett:
By cfield
26th Apr 2016 12:13

Kleenex

cheekychappy wrote:

You have been reading the stripper thread too often.

That's why I bought them ;-)

Thanks (1)
Replying to Paul Crowley:
By cfield
26th Apr 2016 13:44

Tax credits on dividend vouchers

fawltybasil2575 wrote:
I must respectfully disagree the suggestion above that dividend vouchers are not required by law. This link should clarify:- http://www.legislation.gov.uk/ukpga/2010/4/section/1104 Basil.

Section 1106 is very interesting. Sub-section 6 says "for the purposes of sub-section 4(c) it does not matter whether or not any person is in fact entitled to a tax credit in respect of the dividend or interest.

I guess technically we have to keep applying this until they amend the legislation.

Thanks (0)
avatar
By tonycourt
26th Apr 2016 13:57

A facetious observation...or two

First a non facetious comment - thanks Basil, I wondered when someone would point out that important point. And if anyone else says "it's only a piece of paper" I'll stamp my feet. While paper is the bane of my life there are practical reasons why documents relating to payments are needed or at least useful - not just for tax. But since I've mentioned tax, envisage this.

HMRC investigator - "what's this payment in your bank statement for £X,000"

HMRC customer - "It was a divi from my uncles business"

HMRC investigator - "prove it" 

You can guess the rest - it would be resolved eventually I'm sure, but after how much hassle and effort. By which time the HMRC bod's hackles are up and so are yours all resulting to he or she picking holes in all your records. All for the want of a horse shoe nail!

@ Cfield - a facetious observation; why not mention other things you haven't charged on your divi vouchers; ergo  

SDLT  N/A

VAT N/A

TV and dog licence fees - hmmmm! N/A

And how long does it take to provide clients with a revised draft divi voucher - not long.

 

 

Thanks (0)
Replying to DaveyJonesLocker:
avatar
By whatdoyoumeanwashe
26th Apr 2016 14:09

Sure...

tonycourt wrote:

HMRC investigator - "what's this payment in your bank statement for £X,000"

HMRC customer - "It was a divi from my uncles business"

HMRC investigator - "prove it" 

The moment there's more than one person involved it can get tricky, of course, but:

HMRC investigator - "what's this payment in your bank statement for £X,000"

HMRC customer - "It was a divi from the company that I own 100% and of which I am the only director"

HMRC investigator - "prove it" 

HMRC customer - "Sure, just close your eyes for 2 minutes..." (or more likely "my dividend paperwork is at home, I'll send it to you by the end of the week")

 

I'm not saying it's right, and it's certainly not what I'd advise my clients to do, but short of carbon dating they'd struggle to prove the voucher and minutes had been prepared retrospectively, and with only one person involved, the chances of disagreeing with oneself over what happened are low...

Thanks (0)
paddle steamer
By DJKL
26th Apr 2016 14:34

Good reason for vouchers

There is good reason for them.

Not all dividends are paid by owner managed business entities therefore it is pretty useful to a taxpayer (their agent) to know that the payment from Centrica was a dividend or a capital distribution or whatever. And with our future making tax digital do we not want something to check HMRC have got things correct on our client's account?

Whilst online accounts do put a narrative and other metrics (I get rather handy bar chart reporting) not everyone has all holdings in the ether, some still hold a few in paper form.

It is even more important with scrip dividends as nothing may feature in the bank.

Now the Shell's of this world appear to get away with an annual statement showing each of the four dividends and whilst I know these days the accountant's software tends to do auto populate from the set up holdings in the software, with scrips that bit of paper showing the individual has three more shares re the second dividend and another two with the third is pretty useful.

So, either rules change re type/sizes of companies needing to issue vouchers or we still need vouchers from all companies. As I find them very useful as a quick check, once the software has auto populated via the import function ,that there is nothing happening I have not detected, long live dividend vouchers.

Thanks (1)
avatar
By DorotaT
27th Apr 2016 11:16

My assumption is that you still need to issue the dividend vouchers as per HMRC instructions 

 https://www.gov.uk/running-a-limited-company/taking-money-out-of-a-limit... no?
  

Thanks (0)
Replying to paul.benny:
avatar
By JDBENJAMIN
27th Apr 2016 12:01

HMRC 'guidance'

DorotaT, don't assume that just because HMRC put something in their guidance it is correct. There is loads of stuff in there that is wrong or merely their own view of what the law should be rather than what it is.

Thanks (0)
7om
By Tom 7000
27th Apr 2016 11:20

Yes

Dont breach the Companies Act

Thanks (0)
avatar
By hondaman
27th Apr 2016 11:36

Tax voucher becomes Dividend Confirmation Voucher

http://www.theqca.com/information-centre/regulations/112861/dividend-tax...

Thanks (1)
avatar
By JDBENJAMIN
27th Apr 2016 11:56

Backdating dividend vouchers

This is one of those things no one will own up to doing, but I bet nearly everyone has backdated documents such as these. Of course, I am am one of the few that hasn't. (Crash! My nose has just gone through my screen!)

Thanks (2)
avatar
By JDBENJAMIN
27th Apr 2016 12:16

Dividend vouchers and the law

I am not aware of anything in company law that requires dividends vouchers. Accountants should resist arguments from HMRC trying to invalidate a dividend merely on the absence of a voucher. The fact that directors have made a payment and described it in their accounting records as a dividend would very likely be held as evidence enough that it was exactly that. Even if a dividend is dated on the last day of the accounting year, and is clearing a DLA, the fact that the directors approved the accounts and had cleared the DLA thus in previous years could well be enough evidence of intention at the date of the dividend. Anyway, the bottom line is that I have never known HMRC try to challenge a dividend unless it was in excess of accumulated profit, and even then their line of attack was merely that the illegal part of the dividend would constitute a director's loan.

Thanks (3)
Replying to Wanderer:
paddle steamer
By DJKL
28th Apr 2016 12:18

I have had the opposite

JDBENJAMIN wrote:

Anyway, the bottom line is that I have never known HMRC try to challenge a dividend unless it was in excess of accumulated profit, and even then their line of attack was merely that the illegal part of the dividend would constitute a director's loan.

I have had the opposite, HMRC trying to argue dividends had been paid (cumulative preference dividends) when they had not.

HMRC argued the point that as the dividends were within the P & L, under interest payable  (and of course added back for tax) ,with a matching provision in the balance sheet then they were available to the directors (had been credited)

The counter was that FRS25 required the dividends to be accrued and treated as an expense and the notes to the accounts clearly indicated the sum in question was merely provided not paid, however salutary lesson that where such provision has been made ensure the accounts note is crystal clear re what is happening.

Given HMRC are prepared to argue the case (albeit losing) that a dividend in a set of accounts indicates its payment it would be perverse ( but such things aret not unknown) if they attempted to argue that an ordinary dividend within a set of accounts had not been paid.

 

Thanks (0)
avatar
By Malcolm McFarlin
28th Apr 2016 11:15

Interesting replies

Thanks for everyone's comments -very interesting.

To summarise  -no one ever appears to have been asked by HMRC for evidence of dividend vouchers and no one has ever met or seen a member of the Dividend Police Force under Company Law.

Thanks (1)
Replying to Arthur Putey:
avatar
By whatdoyoumeanwashe
28th Apr 2016 12:00

They have...

Malcolm McFarlin wrote:

Thanks for everyone's comments -very interesting.

To summarise  -no one ever appears to have been asked by HMRC for evidence of dividend vouchers and no one has ever met or seen a member of the Dividend Police Force under Company Law.

Oh they have. It's just that they're all in jail without access to AWeb.

Thanks (0)
avatar
By Malcolm McFarlin
04th May 2016 15:16

'The Sunday Times reported on 01/05/16 that Sir Philip Green paid £400m of dividends from BHS to his wife in the tax haven of Monaco and two partners during his 15 year ownership'
I am sure he is glad that he kept his dividend vouchers and notes of the Board Meeting.

Thanks (0)