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MissionPossible
22nd January 2019, 13:54
Hi Experts,

Would be great if someone can help me with my basic understanding of dividend declaration based on below example scenario.

Example Scenario:

First Accounting year: 1st Aug 2015-31st July2016
For first 6 months (until 31st Jan 2016) - I and wife are both 50% shareholders.
Advance dividend declared of £2000 declared for both (ie total £4000) in 3rd Month ( ie 1st October 2015 ). Company in profit at that point and dividend declared is less than profit at that point.
On 1st Feb - I am 100% shareholder
Another advance dividend of £2000 declared for myself only on 1st March 2016
At company year end - I'm 100% shareholder. And company declares dividend of (£2000*2+£2000 = £6000)


Doubt: Do you see any issue with the above approach with dividend declarations ?

PS: I understand I would not get "legal advise" but I would really appreciate constructive feedback rather than comments like get an accountant ( as I'm doubting his expertise and in process of changing him)

WTFH
22nd January 2019, 14:02
Hi Experts,

Would be great if you help me with my understanding of dividend declaration based on below example scenario.

Example Scenario:

First Accounting year: 1st Aug 2015-31st July2016
For first 6 months (until 31st Jan 2016) - I and wife are both 50% shareholders.
Advance dividend declared of £2000 declared for both (ie total £4000) in 3rd Month ( ie 1st October 2015 ). Company in profit at that point and dividend declared is less than profit at that point.
On 1st Feb - I am 100% shareholder
Another advance dividend of £2000 declared for myself only on 1st March 2016
At company year end - I'm 100% shareholder. And company declares dividend of (£2000*2+£2000 = £6000)


Doubt: Do you see any issue with the above approach with dividend declarations ?

PS: I would really appreciate constructive rather than comments like get an accountant ( as I'm doubting his expertise and in process of changing him)

No issue with the declaration, but are you telling us all the facts?

Point 3 you say the company was in profit at that point. Was it still in profit when you gave yourself the next dividend?
Do you mean for 2015-16, or is it for 2017-18?

If £6,000 was paid out as dividends, then declaring £6,000 as dividends is correct. What is causing you doubt? Is it related to some missing information?

Craig@Clarity
22nd January 2019, 14:04
What you've stated sounds ok to me. You've declared and paid dividends in accordance with the shareholdings at the time and within the retained profits amount after corporation tax provisions. You should have the dividend declaration and voucher to support this and your personal tax return should have reflected the dividends you received too. Sounds fine. What's your concern?

northernladuk
22nd January 2019, 14:06
PS: I understand I would not get "legal advise" but I would really appreciate constructive feedback rather than comments like get an accountant ( as I'm doubting his expertise and in process of changing him)

Won't get that anywhere :D

There is doubting your accountants expertise and a very basic dividend question. If he can't be trusted with a question like this they you are quite right to get rid... and quickly.

MissionPossible
22nd January 2019, 14:08
These are not exact facts - figures and dates have been changed massively without changing the essence of question.

To answer why the doubt even arise - its simple, one of those friends who gives you some half-baked info that makes you self-doubt the understanding.

According to the "friend":
When I declared dividend on 31st July - I was the 100% shareholder. So - the total dividend amount of £6000 should be only declared for myself.

WTFH
22nd January 2019, 14:11
According to the "friend":
When I declared dividend on 31st July - I was the 100% shareholder. So - the total dividend amount of £6000 should be only declared for myself.


If your friend is an accountant or is recommending accountants to you, I'd suggest you need to change your friends.

Your wife should have declared £2k, you should have declared £4k, the company declares £6k.

MissionPossible
22nd January 2019, 15:52
Thanks all for super-quick responses! :smile
FYI - I had stated modified figures and dates in my original query without changing the scenario in question.

Reason for doubt:
The doubt arose when "someone" pointed out (correctly/incorrectly) that dividend needs to be distributed in ratio of shareholding that you have at time of submitting your company accounts.
So in stated example - I was 100% shareholder at the time of company-year-end so £6000 should be allocated to myself. I doubted this observation and hence posted the query.
These dividends were dividends in advance ( I'm assuming that can be termed as interim dividend)

Additionally, correct me if I'm wrong - the £2000 dividend transferred on 1st October 2015 to both shareholders will be declared respectively in their Self Assessment ending April 2016? And, for company accounts purposes, the same dividend transaction (£4000 in total) woould be declared in company year ending July 2016 ? Reason I ask this - need confirmation that the date on which dividend is credited to shareholder's account is what matters for Self assessment declaration.

Company was in profit in at time of every dividend transaction.

Alchemy Accountancy
22nd January 2019, 16:23
The doubt arose when "someone" pointed out (correctly/incorrectly) that dividend needs to be distributed in ratio of shareholding that you have at time of submitting your company accounts.

This is not correct - the dividends should be distributed in accordance with the shareholding at the time the dividend is declared.

Craig@Clarity
22nd January 2019, 16:35
Additionally, correct me if I'm wrong - the £2000 dividend transferred on 1st October 2015 to both shareholders will be declared respectively in their Self Assessment ending April 2016? And, for company accounts purposes, the same dividend transaction (£4000 in total) woould be declared in company year ending July 2016 ? Reason I ask this - need confirmation that the date on which dividend is credited to shareholder's account is what matters for Self assessment declaration.

Company was in profit in at time of every dividend transaction.

Yes, the dividends should reflect the allocation at the time they were declared i.e. £2k should be allocated to each shareholder and reflected on their respective SATR's. For company accounts purposes, the total £4k is stated. The declaration date of the dividend is the important date and what counts for self assessment purposes. The payment date of the dividend (either being on the same date or at a later date) is the date which the dividend can be physically paid thereafter.

WordIsBond
23rd January 2019, 11:27
I think I'll buy shares in SSE (they pay a nice dividend) just before the year end so that I own a percentage when they file their annual accounts. I'll expect to get a share of dividends as if I'd held it all year. Or something. :eek

By the way, you said on your initial dividend that the company was in profit and the dividend was less than the profit at that point. To be pedantic, it should have been less than the after-tax profit, having deducted the corporation tax which would be due on the profit to date.

MissionPossible
23rd January 2019, 16:40
I think I'll buy shares in SSE (they pay a nice dividend) just before the year end so that I own a percentage when they file their annual accounts. I'll expect to get a share of dividends as if I'd held it all year. Or something. :eek

By the way, you said on your initial dividend that the company was in profit and the dividend was less than the profit at that point. To be pedantic, it should have been less than the after-tax profit, having deducted the corporation tax which would be due on the profit to date.

I understand your point and at some level I knew that the original doubt was not making sense but still need to put out these kinda naive questions at times :ohwell

Yes - I meant after-tax profit.

I understand that we need to follow usual process (vouchers/meeting MoM etc) for such advance(interim) dividends BUT do we submit/mention them anywhere else other than year company accounts under the Dividends ?

Lance
24th January 2019, 10:04
I understand that we need to follow usual process (vouchers/meeting MoM etc) for such advance(interim) dividends BUT do we submit/mention them anywhere else other than year company accounts under the Dividends ?

Yes. In the shareholders SATR.

Share transfers need to be registered with companies house as well.