Dividend Overpayment

[jungleboogy]

I have paid myself a dividend of more than the profit made by my company for that month. I plan to take a reduced dividend for the next couple of months so that by the end of the financial year it will smooth itself out. Is that acceptable ? Currently I pay myself a monthly dividend.

[northernladuk]

I have paid myself a dividend of more than the profit made by my company for that month. I plan to take a reduced dividend for the next couple of months so that by the end of the financial year it will smooth itself out. Is that acceptable ? Currently I pay myself a monthly dividend.

Personally I wouldn't. Over paying dividends from money that is not yours I believe is illegal. You don't just fix something you have done illegally by sorting it out over a few months to suit you. It is not your money, sort it first before paying yourself a divi.

You don't mention if you have a warchest though. Is teh comapny in profit overall or do you live hand to mouth?

If you have paid yourself money that belongs to HMRC pay it back quick.

[MarillionFan]

Sort it out at the end of the year. It's not a monthly race it's a yearly marathon.

[northernladuk]

Sort it out at the end of the year. It's not a monthly race it's a yearly marathon.

Really? I thought it would be wiser to get back to a reasonable status quo as soon as possible by using the directors loan or repay?

Quote I found

While drawing a dividend illegally will mean that a director is in breach of his fiduciary duties, and brings about an obligation to repay

EDIT...Ahh, something else ..

What if the company pays me too much?
If you take out more than you're owed, there may be extra tax to pay.

And it's illegal for your company to pay out more in dividends than it has available as profit for this year or profit held over from a previous year.

From http://www.freeagentcentral.com/supp...-is-a-dividend

So would go with MF's advice not mine lol
The OP mentions profit for the month, have you profit from the rest of the year or do you withdraw it all?

[jmo21]

Assuming everything is fine at the end of year, and HMRC aren't investigating and combing through your bank accounts, I would think you'd be fine.

Even if they do, and everything adds up, would they try and fine you in some way?

[northernladuk]

Assuming everything is fine at the end of year, and HMRC aren't investigating and combing through your bank accounts, I would think you'd be fine.

Even if they do, and everything adds up, would they try and fine you in some way?

The dividend would be be eligble for Tax and NIC's

[MarillionFan]

As usual NLs advice is simplistic and staid.

For example i pay my accountancy fees yearly, shortly after the financial year. Or office rental every quarter??? My telephone bill is quarterly. Hey what about a yearly rail card???

You don't really know your profit until the end of the year so to say it is 'illegal' to take out to much in a given month is riculous. The same goes with corporation tax. It's over the year, if you took too much out it's down as a loan and your accountant can work out any fees/interest. Just don't take the piss.

[northernladuk]

As usual NLs advice is simplistic and staid.

For example i pay my accountancy fees yearly, shortly after the financial year. Or office rental every quarter??? My telephone bill is quarterly. Hey what about a yearly rail card???

You don't really know your profit until the end of the year so to say it is 'illegal' to take out to much in a given month is riculous. The same goes with corporation tax. It's over the year, if you took too much out it's down as a loan and your accountant can work out any fees/interest. Just don't take the piss.

I will happily take that criticism and agree. There needs to be a balance of what is right and wrong for people to then learn what they can get away with. I don't agree telling someone that doesn't understand their finances well enough to mess up it is ok to wait it will sort itself out. There could be temptation to continue in that laissez faire attitude until the tulip really hits the fan.

I would rather (try) give the black and white of the situation so the OP's understand exactly what they are doing wrong first. Then yes, agreed, when the OP can understand and manage his finances he can sort it out over the year.

Besides, to be fair, I learn more looking it up and regurgitating what I have found.

[xoggoth]

Agree with MF. Even if you do a full profit & loss before the divi, there's nothing to stop profits diving thereafter, if you can't do the contract due to illness perhaps. It's the year end that really matters.

[MarillionFan]

I will happily take that criticism and agree. There needs to be a balance of what is right and wrong for people to then learn what they can get away with. I don't agree telling someone that doesn't understand their finances well enough to mess up it is ok to wait it will sort itself out. There could be temptation to continue in that laissez faire attitude until the tulip really hits the fan.

I would rather (try) give the black and white of the situation so the OP's understand exactly what they are doing wrong first. Then yes, agreed, when the OP can understand and manage his finances he can sort it out over the year.

Besides, to be fair, I learn more looking it up and regurgitating what I have found.

Of course. I think both sides is completely valid.

The truth is the OP should be looking as if he's running a business. He needs to understand cash flow, his yearly forecast, expenses, accountancy and VAT. All contractors should have a forecast spreadsheet in my opinion, excluding VAT (that's always Hectors) , 20% allocated for Corp tax, basic salary amount offset and the rest is what they can take as divvies. It's extremely easy and simplistic to do, without of course someone like the OP could find themselves with a new roommate called Bubba. ;-)