What did he say? A similar topic came up in conversation today - from April 2013 it is going to be even harder for an owner/shareholder to take money out of a company and worry later about whether it is dividend, salary or loan account because Real Time Information requires HMRC to be notified of most salary payments on or before the day they are made.
While it is possible (although probably fraudulent) to write up backdated dividend vouchers and sole director's decisions after the event, you can't forge an RTI submission.
@MrAnchovy, that means nothing to me My accountant just said on the phone to me, take out money and when he did the accounts he'd split it between salary and dividends. Nothing said about Articles, vouchers, etc. So it's literally just money gone out of the account, and entered into accounts as 'dividend'. I'm seeing accountant tomorrow anyway...
@PermaShattered if HMRC come to inspect they will expect to look at the minute books and see records of decisions to declare dividends in accordance with the Articles, as well as appropriate entries of the shareholding in the members register and dividend vouchers as evidence of the notional tax credit.
Perhaps your accountant is going to take you through this sometime before the first dividend.
MrAnchovy what do you mean "if it has been delared as such by the Company..."
I'm the sole director/shareholder and my accountant just says he'd split my 'income' between salary to the extent there's no income tax, rest as dividends so that it will only attract corporation tax....
"I'm no expert by any stretch but my understanding is that if you take money out of the business it's dividends, no matter what you do with it."
You may be thinking of drawings in the context of a self employed business.
For a Company it is only a dividend if it has been declared as such by the Company in accordance with its Articles (and may not be treated as a dividend by certain tax provisions unless the appropriate voucher has been issued).
Here are some other ways a person may receive money from a Company: - payment for goods or services - payment for a contract of service (employment) - payment as an office holder (director's fee) - a loan from the Company - repayment of a loan to the Company - interest on a loan to the Company - reimbursement for expenses incurred on behalf of the company - damages settling a loss in contract or in tort - repayment of capital - theft
I'm no expert by any stretch but my understanding is that if you take money out of the business it's dividends, no matter what you do with it. Excluding legitimate business expenses obviously, like If you pay for something out of your personal account then 'pay' yourself put of your work account.
There are some "advisors" (I will not call them accountants) who set up schemes where owner managed companies make payments that are not treated as dividends. I won't give any more details, but suffice it to say that if it feels wrong it probably is.