Interim dividends

[hb]

I have recently established a limited company which I am a joint shareholder with my wife. From a tax administration perspective is there any formalities to complete before we make interim dividend payments e.g. is there a requirement to disclose / declare these payments to the reveune other than on the normal personal tax returns.

[accountant@uktaxshop]

The requirements here are more from a company law point of view.

You have to firstly ensure the dividends are legally available out of distributable reserves.

In practice this means drawing up draft accounts for the period in question (assuming there are not reserves available from the previous accounts – which wont be the case for you) However as there is no format for this specified, this can in practice be done in a fairly simple manner of income, expenditure on an accruals basis, and tax due given a net distribution available.

Secondly you need to declare the dividend. It will depend on your articles of association, but if they donÂ’t mention it, they are payable only when declared by an ordinary resolution passed by the shareholders in general meeting. Again in practice all you need to do is have a meeting and minute the review of the draft accounts, and approve the dividend.

If you donÂ’t follow this, your "dividends" could become an undeclared salary in the eyes of the IR, which is going to get rather expensive.

I would have hoped the advisor who suggested you set up the ltd co should have gone through this sort of thing with you at the outset. If you need any help with the running or accounting of your ltd co, please let me know.

Regards

James Smith
Chartered Accountant
www.uktaxshop.co.uk
01284 764436