Dividends

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Good Afternoon,

Would you be able to help me with dividend calculations for an SPV (Special Purpose Vehicle) company, please?

The SPV Limited Company purchased a property and is renting it out. They provided £25,000 for the home deposit, which was transferred to the LTD Business account and then used to pay the bank as a deposit.

I recorded this transaction as follows:

  • Bank Debit: £25,000
  • Director Loan Credit: £25,000

Now, after a year, they would like to pay themselves dividends, totaling around £5,000 for the whole year.

Am I correct in thinking that these dividends will not be reflected immediately, as the total amount on the Director Loan account will still be in credit at £20,000?

So, the first time I need to show a dividend in a self-assessment is when the director's loan is fully repaid, and only then can we categorize it as dividends paid.

 

thank you for your help !! 

Replies (22)

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By FactChecker
07th Feb 2024 14:00

Leaving aside all other considerations ... "they would like to pay themselves dividends"

So do they (or you) realise the difference between a dividend and loan repayment?

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Replying to FactChecker:
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By User deleted
07th Feb 2024 16:55

Hi. Thank you for your time; it is greatly appreciated. I believe I may have used the wrong terms, leading to a misunderstanding. To clarify, they would like to make some payments to themselves. My main question is whether I can treat this as a director's loan repayment, considering they had initially put money into the company.

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Replying to User deleted:
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By FactChecker
07th Feb 2024 18:39

I'm sorry, but you're still not making much sense - and whether I could hazard a guess at what you mean is not the issue.

What is your personal role in all this? I ask because you don't seem fully equipped to handle it all unaided, so should be seeking professional advice.

As a for instance: "The SPV Limited Company purchased a property and is renting it out. They provided £25,000 for the home deposit."
Who is/are "they"? Shareholders or Directors or both? One person or more? If more than one, how is the DLA split - and would any dividends be declared equally for all shareholders? Is the business profitable (after costs, tax, etc)? / Does it hold more than one property? / Are the property/ies in the UK? / Are the shareholder(s) UK tax residents? ... and on and on ...

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David Winch
By David Winch
07th Feb 2024 14:01

Short answer, "No".
Longer answer, "Have a sit down chat with an accountant to get a better understanding of all this".

Thanks (8)
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By Bobbo
07th Feb 2024 14:08

Pro Accounting Office wrote:

Good Afternoon,

Am I correct in thinking that these dividends will not be reflected immediately, as the total amount on the Director Loan account will still be in credit at £20,000?

No. The company can:
- declare a dividend which it pays out in cash, not affecting the director loan account (assuming for this purpose the director is the sole shareholder) or
- declare a dividend which is added to the director loan account and coincidentally the same amount is repaid from the director loan account at another time or
- repay £5,000 of the director loan account and not declare any dividends.

Pro Accounting Office wrote:

So, the first time I need to show a dividend in a self-assessment is when the director's loan is fully repaid, and only then can we categorize it as dividends paid.

No. The company could 'choose' to repay the director loan first before declaring any dividends, or it could declare dividends and not reduce the loan balance at all (or even increase it!).

This of course assumes 1) the company has generated at least £5,000 (your amount) of distributable profits and 2) there is nothing in the mortgage attached to the property precluding the company from paying dividends until certain conditions are met.

Couple of other points:
- can we just stop calling basic limited companies an SPV
- would avoid including the name of my employer in my profile name if I was asking such a basic question
- I assume of course a transfer was made to the company account for subscribing to the company's share capital

Thanks (5)
Replying to Bobbo:
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By User deleted
07th Feb 2024 17:05

Hi. Thank you for your time; it is greatly appreciated. I realize I might have used the wrong terms, leading to a misunderstanding. To clarify, they intend to make some payments to themselves. My main question is whether I can treat this as a director's loan repayment, given that they initially put money into the company.

Regarding the other points:

-Why can't we refer to it as an SPV?
-No, I cannot. We are a small and new company in this field, and I believe this forum is for asking questions, even if they seem basic. We should be helpful to each other rather than critical.

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Replying to User deleted:
RLI
By lionofludesch
07th Feb 2024 17:37

Pro Accounting Office wrote:

-Why can't we refer to it as an SPV?

Let's put it another way. What do you think an SPV is?

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Replying to User deleted:
RLI
By lionofludesch
07th Feb 2024 17:40

Pro Accounting Office wrote:

-No, I cannot. We are a small and new company in this field, and I believe this forum is for asking questions, even if they seem basic. We should be helpful to each other rather than critical.

When you say "each other", what help have you ever offered to others on this forum? You've only ever replied to threads which you have started yourself.

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By johngroganjga
07th Feb 2024 14:10

For each payment by the company to the shareholder, you need to decide whether it is a repayment of his loan or a dividend. It can be either, but it can’t be both.

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Replying to johngroganjga:
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By User deleted
07th Feb 2024 17:06

thank you for answer and for understanding my question :)

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By sjmaccounting
07th Feb 2024 17:27

pay each shareholder £1k dividend (to use up 0% dividend tax band) and then an additional DLA repayment

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Replying to sjmaccounting:
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By User deleted
07th Feb 2024 18:01

Thank you for confirmation.

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Replying to sjmaccounting:
By JCresswellTax
08th Feb 2024 09:58

You must be confident on the company reserve position.

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Replying to JCresswellTax:
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By sjmaccounting
08th Feb 2024 10:17

oops! absolutely - there must be sufficient distributable reserves

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By JB101
08th Feb 2024 09:51

1. Do they want to pay a dividend?
2. Can the company pay a dividend?
3. Do they want to repay some/all of the loan account?
4. Are the directors the shareholders (and what proportion of the loan belongs to each and proportion of shares does each hold)?
5. Dividends paid can be physically paid or credited to the loan acocunt. They are taxed based on the payment date (this could be the date they are "paid" to the loan acocunt rather than cash leaves the company).
6. Minutes and dividend vouchers should be prepared.
7. It is not appropriate to wait until later on and abckdating these things. A dividend should never be backdated (although, from many postings on this website, they very often are!).
8. I'm sure there are other considerations - but probably not as important.

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By JCresswellTax
08th Feb 2024 09:56

Ohhhh I don't advise on SPVs, I only advise on limited companies, sorry.

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Replying to JCresswellTax:
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By JB101
08th Feb 2024 10:21

Didn't the A-Team drive around in one of those?

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Replying to JB101:
By JCresswellTax
08th Feb 2024 10:54

What? A limited company? Dont think so ;)

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Replying to JB101:
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By FactChecker
08th Feb 2024 13:16

Captain Blue may wish to take you down a quiet alley in order to explain the difference between Thunderbirds and the A-Team!

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Replying to lionofludesch:
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By FactChecker
08th Feb 2024 14:20

Wouldn't want to be picking up the tab for the insurance premiums, certainly!

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Replying to FactChecker:
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By JB101
08th Feb 2024 16:38

I've checked and now think that the A-Team used a MURVI.

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