Dividend Query

[JamieAllen]

I was talking to a friend who says that rules regarding dividend payments have changed recently and must now be paid before the end of the tax year?? I hadn't heard of it and neither has my accountant but my friend insists its correct. My understanding is that they can be paid out of post tax profits whenever?

Thanks.

Jamie

 

[Mitchells Bristol]

Hello there

Your friend is probably referring to the fact that you can no longer include "proposed dividends" in your accounts. A dividend is either paid, or it isn't.

I think the change occurred in around 2004/2005 time - you used to be able to propose a dividend and show this as a liability on the balance sheet.

You are right, providing the company has sufficient distributable reserves, then dividends can be declared and paid whenever you want. However, if they are declared as a dividend in the accounts, they have to be paid on that date (or credited to a director loan account which is typical in smaller owner managed businesses).

Hope this clarifies