rules for dividends - time of payment?

[David McGeorge]

Can this happen:

1. Dividend voted by Ltd Co. board to a director in March
2. Director puts that dividend on his SA tax return for that year ending April
3. BUT - director does not receive cash for the dividend from the business there and then (March).
4. Director actually receives cash for the dividend in August

So basically, does a dividend have to be paid out from a company at the time a board resolution votes it?

Would appreciate any help with the above.

Thank you

David

 

[primeaccounts]

No, as long as it has been properly minuted and a dividend voucher issued, it could be credited to the Directors Loan Account, then drawn as and when required.

Regards
Wayne

 

[Abacus Accountants]

The dividend would be treated as paid in to the director's loan account. The cash does not have to leave the company's account. The declaration of a dividend in March records a liability to the director at that time.

Remember to keep minutes of the board meeting at which the dividend was agreed and also produce dividend vouchers for shareholder's tax records. Without these HMRC may regard such payments as employment earnings which are subject to tax and national insurance.

Andrew Spanton

 

[David McGeorge]

Thank you both for your clear and informative answers.

David

 

[telephoneman]

Mmm, sorry to muddy the waters but when we are seeking to have a dividend show as income for a particular year our accountant insists that we have to physically pay it out in that year rather than just credit it to the loan account. It usually means that the directors vote and receive dividends at the end of March and often have to lend most of it straight back to the Company.

 

[elaine@cheapaccounting]

Physically paying it is not necessary - can debit it to the directors current account as already said.

 

[David Griffiths]

Physically paying it is not necessary - can debit it to the directors current account as already said.

I prefer my dividends credited to my directors loan account!

 

[elaine@cheapaccounting]

I prefer my dividends credited to my directors loan account!

Oh yeah (duh - bad day) - I was facing the wrong way at the time. The window is normally on my right hand side

 

[DFL]

The payment date is treated as the earlier of the date the dividend was physically paid or when the entitlement to the payment arose (ie when the dividend was voted and loan account credited)