Dividends on HMRC and Corp Tax Return

[Matthew J]

Hi guys

I can't seen to find anywhere to put the £2000 I took as a payment in dividends last year in the HMRC and Companies House filing portal.

I have my directors salary under staff costs and directors remuneration respectively, but there is nowhere to put it..?

I always thought dividends paid went on P&L, but in their systems, Im not sure which category to put this in..?

This is the only part im missing, any help would be great

Thanks!

 

[Spur Support Services]

HMRC are only interested in looking at profit before tax and dividends, which is why dividends don't appear in the Corporation tax Return.

Companies House expect the balance sheet to show the profit and loss reserve balances after the dividend has been paid.

P&L reserve balance = P&L reserve b/fwd from previous year, less profit/loss before tax, less tax, less dividends.

I hope this helps

 

[Matthew J]

HMRC are only interested in looking at profit before tax and dividends, which is why dividends don't appear in the Corporation tax Return.

Companies House expect the balance sheet to show the profit and loss reserve balances after the dividend has been paid.

P&L reserve balance = P&L reserve b/fwd from previous year, less profit/loss before tax, less tax, less dividends.

I hope this helps

Thanks that has made it clearer, but Im still a bit confused :-? I should mention I am filing micro entity so choices available I believe are less.

Companies House portal is computing my final p&l figure based on my inputs. I cannot change the P&L final amount. This means the final amount is £2000 more than it should be. This is also my first year. These are the options I can choose:

Turnover (including Eat Out to Help Out)

Help for Income from coronavirus (COVID-19) business support grants

Other income

Help for Cost of raw materials and consumables

Staff costs

Depreciation and other amounts written off assets

Other charges

Tax on profit

Profit or (loss)

Maybe Im just not getting it but should the £2000 be taken off my turnover amount, or added to the other charges amount?

 

[Matthew J]

Look ignore the last post, Im just a bit confused atm, ill be back in a bit lol

 

[DWS]

You pay Corporation Tax on your profits and then you can declare dividends, they do not reduce your profits

 

[Anna Chandley]

The dividends do not go in the profit and loss account.
They are deducted from capital and reserves in the bottom half of the balance sheet
The capital and reserves will be made up of

Share capital issued + reserves brought forward +profit after tax - dividends paid.

The profits after tax figure should agree to the total of the profit and loss account.

 

[Matthew J]

Thanks guys

"The profits after tax figure should agree to the total of the profit and loss account."
So is below correct?

Net profits chargeable to Corporation Tax (HMRC submission)
is equal to
Tax on profit + Profit(or loss) (companies house submission)

 

[Anna Chandley]

Thanks guys

"The profits after tax figure should agree to the total of the profit and loss account."
So is below correct?

Net profits chargeable to Corporation Tax (HMRC submission)
is equal to
Tax on profit + Profit(or loss) (companies house submission)

No. Net profits chargeable to corporation tax (HMRC) will be the profit before taxation (CH) plus or minus any tax adjustments such as depreciation and capital allowances- this figure is not part of the accounts.

In the accounts you will have a profit before taxation and a tax charge to give profit after tax which is the figure which will be added to reserves.

 

[Matthew J]

Thank you so much guys

I swear Im close to having a breakdown lol. I thought micro ent would be easy.
Below are my numbers for the period.
If anyone could have a look and perhaps let me know whether Im on the right track. Id be so appreciative.

INCOME
2020

Turnover 13,398
Income from coronavirus (COVID-19) business support grants 0
Cost of Materials ( 21 )
Staff Costs ( 8,019 )
Other charges ( 3,283 )
Tax on Profit ( 394 ) - corp tax calculation based on profit before tax - 2075
Profit or (Loss) for Period 1,681


BALANCE SHEET

Current assets: 1,681 (or is it 2075 inclusive of corp tax)
Creditors: amounts falling due within one year: ( 394 ) - this is corp tax
Net current assets (liabilities): 1,287 ( or 1681?)
Total assets less current liabilities: 1,287 ("")
Total net assets (liabilities): 1,287 ("")
Capital and reserves: 1,287 ("")

Thanks guys

 

[Anna Chandley]

Your balance sheet is wrong. The profit for the period is not a current asset. I would expect there to be a bank balance possibly a directors loan balance.

With a profit after tax of £1681 and dividends paid of £2,000 your capital and reserves figure would be (£319) plus share capital.

Did you prepare a trial balance (which balanced) before trying to prepare the accounts?

 

[Matthew J]

Your balance sheet is wrong. The profit for the period is not a current asset. I would expect there to be a bank balance possibly a directors loan balance.

With a profit after tax of £1681 and dividends paid of £2,000 your capital and reserves figure would be (£319) plus share capital.

Did you prepare a trial balance (which balanced) before trying to prepare the accounts?

Thank you. Ok that's good. I prepared everything and its the dividends that has thrown me a bit.

I actually changed current assets for the period was showing as £57(bank balance). This didn't look correct as I couldn't link it to my income statement

With that number my balance sheet now shows:


2020

Current assets: 57
Creditors: amounts falling due within one year: ( 394 )
Net current assets (liabilities): ( 337 )
Total assets less current liabilities: ( 337 )
Total net assets (liabilities): ( 337 )
Capital and reserves: ( 337 )

No change to P&L

Thank you so much, but does this now make more sense?

 

[Anna Chandley]

If your bank balance is £57 at the year end then you are missing £18 somewhere if all income and expenses went through the bank account. Share capital is also missing.

 

[Uke]

Mate, get an accountant. Best investment you can make for your business and you can chill out rather than having a breakdown!

 

[Matthew J]

If your bank balance is £57 at the year end then you are missing £18 somewhere if all income and expenses went through the bank account. Share capital is also missing.

Thanks again

So it should be £75? Woah

As for share capital, on the HMRC portal an companies house portal for micro ent, I cannot input that anywhere

EDIT- Found it, now have to work it out lol

 

[Anna Chandley]

The bank balance should be whatever the bank statement says it should be

 

[Matthew J]

The bank balance should be whatever the bank statement says it should be

Ok, thanks

Ill be back in three hours as Ive just noticed something that I may have done which has muddled everything up.

 

[Matthew J]

Ok, if this isn't right then Im gonna have to give up. Im so hoping this is ok as if its not then Ive no idea:

Turnover 13,399.
Cost of raw materials and consumables(21.00)
Staff costs(8,236)
Other charges(3,081)
Tax(407)
Profit or (loss)1,654

Dividends paid £2000


Balance sheet

Share capital £1 (specified when set up company as sole director)
Current assets 61
Creditors: amounts falling due within one year (407)
Net current assets / (liabilities) (346)
Total assets less current liabilities (346)
Net assets (346)
Capital and reserves (346)


Please someone tell me this is right. I beg lol

 

[Scalloway]

Is this the accounts for the first year of trading?

Profit or (loss)1,654

Dividends paid £2000

Your dividend has exceeded the profit available.

Share capital £1 (specified when set up company as sole director)

Have you paid for the share? Unpaid share capital appears on the accounts as a debtor. On the other side it gets added to the profit or loss to make Capital and reserves

 

[Lisa Thomas]

These posts make me nervous. OP I highly recommend you get an accountant. Mistakes will not come cheap.

 

[Matthew J]

Is this the accounts for the first year of trading?



Your dividend has exceeded the profit available.



Have you paid for the share? Unpaid share capital appears on the accounts as a debtor. On the other side it gets added to the profit or loss to make Capital and reserves

The dividend was paid directly to the directors loan account, which I hadn't journaled, only recorded. Yes I messed up

These posts make me nervous. OP I highly recommend you get an accountant. Mistakes will not come cheap.

Rofl. Ive been nervous for a week! However, I was calculating my owed tax based on the year rather than the period, which meant I wasn't balancing and I couldn't see why. in the end, I just deleted a lot and started again with bank transactions, and it balanced.

I did have it checked by a friend before submission and checking my account today, the amount showing that I owe is the amount I submitted.

Thanks for your help guys. Time will tell, if they enquire they enquire, if there are mistakes then there are mistakes, but everything does balance and it seems it has been accepted.

I am so glad I did it. have learnt so much through trial and error and practical experience is beneficial. Not sure Id try this if I had more than one client and a higher turnover, but im glad its done.

 

[TheCyclingProgrammer]

You need an accountant. As mentioned above, it sounds like you haven’t declared a legal dividend if it exceeds the profits available. You will need to record the excess as a director’s loan and either repay it or declare another dividend in future to cover it once you have enough profit to cover it.