Dividend Paperwork – Are you compliant?
Dividends can be voted and distributed to shareholders of a Limited Company from available retained profits within the business. These usually tend to form a large part of a director's remuneration (who normally are also shareholders) as they are taxed more favourably then PAYE income on an individual.
Dividends currently are free from income tax on the first £5,000 and then subsequently taxed to an individual at 7.5% as a basic rate tax payer, 32.5% as a high rate tax payer, and 38.1% as an additional rate tax payer.
These payments therefore must be supported by relevant documentation to validate the amounts voted as dividends.
Before a dividend is paid, a directors meeting should be held to declare the amount to be paid as a dividend. The decision is then recorded within the Minutes of the meeting. An example of typical Minutes that could be used to formerly declare a dividend on a share class can be accessed via the button below.
As well as holding a meeting and keeping Minutes of the decision, a dividend voucher must also be prepared and provided to each shareholder for their retention, either electronically or as a hard copy. The dividend voucher should include the following information:
1 – Date
2 – The name of the Limited Company and Company number
3 – Shareholder name
4 – Share class the shareholder holds
5 – Number of shares held
6 – Amount paid per share
7 – Dividend paid
Press the following button to see an example dividend voucher template
If you would like to discuss further the above requirements to support dividend payments or wish to review your company or personal tax affairs, please contact your local Perrys branch.
Article written by Alex Skinner