Issuing a dividend!

The decision to issue a dividend should be made at a meeting of the directors. A formal record of the meeting should be recorded in a set of meeting minutes. Even if the company only has one director who is also the shareholder a set of meeting minutes must be recorded. This is a formal record of the decision to pay a dividend and HMRC expect these to be kept on record.

The meeting minutes typically record-

• Name of the limited company issuing the dividend
• Date the meeting was held
• People present (even if just a sole director company)
• Location of the meeting (typically the registered office)
• Amount of dividend to be issued to each share class
• Any other business discussed or simply add that no other business was discussed

When a dividend is paid a dividend voucher must be issued to all shareholders receiving a payment. This needs to include-

• Name of the limited company issuing the dividend
• Shareholders name
• Shareholders address
• Number of shares held by the shareholder
• Amount of tax credit
• Amount paid to the shareholder
• Date the dividend was issued
• One of the company directors must sign the dividend voucher

It is normal practice for the company to keep a copy of the dividend vouchers on record with the meeting minutes. These may be requested by HMRC to prove the payment was a dividend and not salary which would be taxed as PAYE.

For small companies where the directors are the shareholders and actively involved in managing the business paying a dividend and a small salary can be more tax efficient than paying a salary only.

This article is provided for information only and is not tax advice. Your personal circumstances must be taken into account when extracting funds from a company.