Frequency of dividends - what can you get away with?

[zebedoo]

Afternoon all - am after some advice about dividends...

I'm trading as a limited company and am the only shareholder. I 'pay' myself by dividends. Some folk say that taking dividends frequently, say every week, looks to Hector like a salary and as such can cause all sorts of problems in the event of an inspection. Other folk say that you can take dividends whenever you like, as long as you can prove that you are not an 'employee' of your client (a la IR35 etc).

Obviously, both of these options require enough post-tax funds in the company, but I was just wondering what advice you good people could give me? I've only just started contracting so am keen to extract as much 'disposable' income from my business account asap and my invoices are paid weekly so it's readily available!

Thanks in advance,

Z

[centurian]

All AFAIK, but I don't think it makes much of a difference. However, if you can manage with infrequent periods, then why take them out more regularly than you need to.

Don't most companies either pay quarterly or annually - in which case go with that if you have sufficient savings.

But if you do need to take them more frequently, I wouldn't lose too much sleep over it.

[JonSmile]

I have always been told that it looks well suspect to issue a monthly dividend as it would flag a 'hang on, that looks just like somebody getting a pay cheque every month'.

Then again I know somebody who does just this and has been doing so for a few years with out issue.

[TheFaQQer]

All AFAIK, but I don't think it makes much of a difference. However, if you can manage with infrequent periods, then why take them out more regularly than you need to.

Don't most companies either pay quarterly or annually - in which case go with that if you have sufficient savings.

But if you do need to take them more frequently, I wouldn't lose too much sleep over it.

WHS.

I pay one annually, plus another one when I have done my personal tax return to use up any balance - it's nice to get an email from the accountant saying "if you want to, take another 5k"

[moorfield]

I take my divis quarterly.

[lje]

I intend to take mine annually - at the end of March so that I can work with the tax situation.

[Gonzo]

There is no "getting away" with anything.

A dividend can be declared whenever the directors see fit provided that there are sufficient profits in the company.

I have "heard" the monthly dividends look like salary idea before but I am not sure from where and besides, the only way that HMRC would find out how frequently dividends are being made is by reading through the minutes of the directors' meetings and the company bank statements.

They won't be reading those unless your company is already being investigated!

[Maslins]

You can pay your dividends as frequently as you like. You should be producing dividend vouchers and minutes of the director meeting where you agreed said dividends. That in itself is one reason why you might not want to pay them too frequently.

Provided you avoid owing the company more than £5k at any one time (as this would lead to a benefit in kind charge) you could simply "borrow" money on a weekly basis and declare dividends slightly less frequently.

But yes, as suggested above, I'd try to personally spend a bit less than you're taking out for a few weeks, then you'll be able to draw out less frequently.

[Olly]

Provided you avoid owing the company more than £5k at any one time (as this would lead to a benefit in kind charge) you could simply "borrow" money on a weekly basis and declare dividends slightly less frequently.

"could"

loan interest is not a benefit in kind charge