Dividends Timing

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George
George Registered Posts: 43 Regular contributor ⭐
in General accounting discussion
From any dividend experts, I'd be very grateful for your input.

A small limited company has a year end of 31 October 2009, and has after tax profit for distribution of £12000. There are two director/shareholders with a 60/40 split. If all the available profit is paid out as dividends, what options and procedures are available (and required) to do this, and what amount is declared as dividends on the 2010 individual tax returns?

Thank you very much for your help.

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  • whiterose
    whiterose Registered Posts: 49 Regular contributor ⭐
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    The company can decide to pay out all or only part of its profits as a dividend, and can decide when to pay the dividend. Don't forget to do the standard paperwork of board minute, dividend voucher, etc. The 'date paid' is the tax point even if the cash is not paid out until later - commonly the divi is credited to the DLA on the date paid, then when it gets paid out of the bank account it is debited out of the DLA to balance.
    It may suit the shareholders to decide to pay a dividend before or after 5th April, so that the income falls in a particular tax year. A lot of PLCs actually brought forward their dividend payments this year to 5th April, so that high-earning shareholders would not pay the extra-high tax rate that came into force on 6th April.
    But beware of backdating all this to many months ago - the decision of the board has to be roughly a real time decision.
  • George
    George Registered Posts: 43 Regular contributor ⭐
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    Dividends Timing

    Thank you Whiterose for your lucid answer. I appreciate it.

    This small company has made an approach to me late in the day. The £12,000 relates to the available dividend in th y/e 31 October 2009. The information I have been shown regarding 31 October 2008 shows dividend distributions of £16,200. This seems to have been taken in equal instalments from April 08 to March 09.

    The problem I see (when I first looked at this in May 2010!) is that the company bank account has continued to pay monthly instalments of £1,350 from April 09 onwards.

    Do you have any further advice you may give? You've been very kind! Thank you.

    (By the way, does the 'etc' in your reply refer to anything in particular?)
  • George
    George Registered Posts: 43 Regular contributor ⭐
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    Dividends Timing

    Sorry, by instalments I mean dividend payments.

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