By now we have established that a contractor that operates through a limited company may be both the sole director and the only shareholder for that organisation.
Even though you are only person involved in the company, you must still ensure that dividends are paid out in the correct manner and part of this process involves filling out the official paperwork.
Paying a dividend isn’t just a case of depositing the money into the stakeholder’s account and then filling out an invoice. You must follow the steps set out by HM Revenue and Customs (HMRC) in order to ensure that the paperwork has been filled out correctly.
Every Time you make a dividend payment from your company to a shareholder, you must must create a dividend voucher. This piece of documentation must contain the following information in order for it to be recognised as evidence of the tax credit by HMRC:
– The limited company name and date of the payment
– The name of the shareholder (which, in this case, is likely to be you)
– The full amount of the dividend being paid out
– The dividend tax credit that you received for the amount.
Dividend meeting minutes
For every dividend payment you must hold a board meeting between the company’s shareholders and directors. This still needs to be done even if you occupy both titles and are the only person involved in the transaction. Of course, in this case the meeting is mainly just the recording of the actual payment.
The purpose of this is to ‘declare’ the dividend, just as it would if you were a company paying out a portion of its profits to a shareholder.
Like the voucher, there are some pieces of information that should be included as a part of the meeting minutes:
– Place of meeting
– The date it took place
– Those present
– What was agreed in the meeting. For example, the payment of the dividend and the closing of the meeting.
At the end of the document you should also include your signature, name in print and the date. In a case where someone else is present then you should alter the meeting minutes accordingly to accommodate for them.
Other things to consider
Once you have made the payment, recorded the minutes and provided your shareholder (which is likely to be you) with the dividend voucher, you can then ask your accountant to integrate this into your corporate accounts.
Although dividend paperwork is relatively straight forward, there is a reason for it. It stands as a record of the transaction should you ever need to prove it to HMRC.
Things you should remember when paying dividends:
– When calculating your Corporation Tax, dividends cannot be claimed as a business cost.
– You can pay a shareholder by dividend at any time as long as your company has made enough profit to justify this.
Our accountancy application is specially designed to make managing your contractor finances as easy as possible, including helping you with Dividends. For more information, contact us today.
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