Must a dividend be declared before the fiscal year-end?

[mbarai]

Hi, my company's year-end is 31st Dec (today), and I have an amount which I need to take out as dividends relating to FY 2012 profits.

However, I still have some monthly book-keeping for December to complete over the next couple of weeks, before I know my exact year-end profit (and hence dividend) position, after allowing for corporation tax.

Do I therefore need to declare a dividend within the current year (i.e. today) or can I both declare and pay it in January? I suppose a dividend declared in January would technically be from retained earnings as opposed to current year earnings - is this allowed?

Also, am I required to involve an independent party (e.g. Accountancy firm) in completing/endorsing the dividend paperwork, or can I simply complete it myself and retain it in my company's records?

Many thanks in advance!

 

[Billmccallum]

Common sense would say that you cant declare a dividend until you know what the year end profit is..... so you cant do that until accounts are finalised.

 

[mbarai]

Thanks, that's what I thought as well, but just found a link on the ICAEW site which suggests otherwise (can't post URL's yet, still a bit of a newbie here).

Wondering if I should declare a dividend within a range (as opposed to a fixed amount) today, and that should allow me to include it within the current year accounts and dated as 31 Dec (albeit as a creditor, which can then be paid in January). Which would bring me to my 2nd question - how can I do this today if I'm a one-man company and have never had an accountant (I do all my book-keeping and HMRC returns/payments).

 

[Philip Hoyle]

No problem in voting and paying it in January when you know your numbers. It will then appear in your 2013 accounts rather than your 2012 accounts but that probably won't matter especially as it doesn't affect your tax. In fact, the reserves being higher in the 2012 year end balance sheet will make the company look healthier if you want credit, bank loans etc.

 

[teddys]

Thanks, that's what I thought as well, but just found a link on the ICAEW site which suggests otherwise (can't post URL's yet, still a bit of a newbie here).

Wondering if I should declare a dividend within a range (as opposed to a fixed amount) today, and that should allow me to include it within the current year accounts and dated as 31 Dec (albeit as a creditor, which can then be paid in January). Which would bring me to my 2nd question - how can I do this today if I'm a one-man company and have never had an accountant (I do all my book-keeping and HMRC returns/payments).

There are a few points you need to take note of:

1. You need to prepare your accounts in accordance with the accepted standards and then arrive at the profits and then work out the taxes. This will be difficult for you unless you're an accountant yourself or you're sufficiently experienced preparing accounts.

2. A company is owned by its shareholders. They take decisions and their decisions are binding on the company. So if you're a one-man-band Ltd, you as a shareholder could decide when to pay the dividend and how much to pay provided you have sufficient profits after tax left in the company.

3. You do not need to pay it today- you could pay next month as well!

Regardless of how small a business you're you should be able to find an accountant these days within your budget. Why not find an accountant to get all this done for you, possibly for a very small fee? Getting your queries answered on here is the easier part; but when you actually sit down to do it you may have a lot more questions yet unanswered!

 

[mbarai]

Thanks Philip Hoyle - just the answer I was hoping to hear

Agree with you Teddys - hiring an accountant is on my to-do list once my festive break is over and I'm back in the UK, as I'll need one anyway to do my year-end accounts and CT calcs as well as endorse my dividend paperwork.

I only started this post because I happened to think that I have to declare a dividend before the end of my company's financial year, which meant I would have to "do" something before COB today.