Dividend paperwork: Pain-free compliance

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The debate over whether dividend paperwork is really necessary will probably never go away.

If you read some of the articles, questions, and reader comments on AccountingWEB which have been posted over the years, recording dividend paperwork is seen by many as an unnecessary formality, overly cautious, or even paranoia about having HMRC try and challenge a dividend payment as salary.

Without any recent high profile cases brought by HMRC to challenge dividend payments, it’s probable that directors, company secretaries and accountants will continue to disregard the requirement for formalised paperwork until a precedent is set. However, with MTD lurking ominously in the background until next year, greater transparency in the future should, in theory, make it easier for HMRC to challenge illegal dividends that should actually be classed as salary or drawings, especially if these are likely to bring a director’s loan account over the £10,000 mark (attracting interest and/or an eye-watering benefit-in-kind tax of 25% if rolled-over between financial years).

Therefore, when paying a dividend it would be wise to reflect on a few considerations highlighted in an article on this subject written back in 2011 by Jennifer Adams.

She stated: “HMRC are increasingly contending that such dividends are in reality earnings under the s62 ITEPA 2003 (salary sacrifice) rules and to persuade them otherwise needs proof that a set procedure for the declaration of dividends has been followed.”

Many accountants will use the excuse that they don’t get paid to do company secretarial work, and that dividend paperwork should really be a matter for the company officials. Typically they will just email the board meeting minutes and dividend voucher templates for the necessary paperwork and instruct clients to fill in the forms. Perhaps not surprisingly, in many cases the paperwork simply does not get done.

Whatever your position may be on the matter, producing the paperwork is clearly a hassle – especially if there are multiple dividends declared and multiple shareholders involved in any given financial year. This issue prompted FD4Cast to produce a free Excel tool driven by macros which automates the production of all required paperwork, reducing it to just a few inputs and mouse clicks.

Outputs can be saved as Excel files or PDFs for easy emailing to shareholders, and there are options to produce multiple dividend vouchers on different dates for either a single company shareholder (minimal inputs required), or for multiple shareholders (slightly more inputs required) and different share classes.

AccountingWEB readers can download the zip file containing the tool and PDF of user instructions here.

About James Power

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15th May 2017 21:53

I've only glanced at the PDF instructions as im browsing on my phone, but the tool looks pretty comprehensive.

I can't believe i didn't even have to enter one of my spam email addresses!

If it truly is a gift with nothing required in return, then thumbs up to FD4Cast.

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16th May 2017 18:43

Perhaps hard to believe but yes, altruism still exists. Therefore 100% free and nothing required in return - not even an email address!

Am happy to do more Excel / VBA freebies exclusive to AWEB readers if they have worthwhile suggestions - either post here or PM me with your requests.

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17th May 2017 10:36

We recommend dividends to the directors, setting out the approximate tax position and then ask for approval. Once given, we record the dividend in Liberty Accounts, which automatically generates the dividend vouchers and the directors minutes. Job done! I would be surprised if other accounting systems do not provide this facility.

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By stanbu
17th May 2017 12:38

If you save the spreadsheet when you have created your dividend vouchers for the first time, you can reload it for the next dividend payment and change the date of the new dividend and anything else that needs changing. This means that you don't have to re-enter the standing data of names, addresses shareholding etc.

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17th May 2017 13:01

Tool now updated to allow users to select between 'Final' and 'Interim' dividend formats following user request.

Simply download from the same link to get the updated version.

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17th May 2017 17:29

Thank you!

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