DIVIDEND ISSUES,PLZ advise URGENT

[ssoct98@hotmail.com]

i need to know following,
need to apply for extension, LTD company established in december 2007,but business starts in march 2008 practically,now my frd is the director and he wants to claim wages from december 2008 to june 2009+dividend(once account filed which is near 11k).he havnt took wages as he is the owner just started from december 2008.

my question is that as dividend given from profit and company accounts made for 1 year from december 2008 to december 2009,can he add dividend as law states 12 out of 15th,as he is applying in june 2009 how he can get dividend from period between december 2007 to december 2008.Did HO consider his dividend or not?He hasnt taken any dividend yet have plan to take once accounts filed in may.

Dividend calculated for 1 year,can he take it in?

[ChetanOjha]

Your friend can claim point on dividends as well. The point whether he can claim between december 2007 to december 2008 depends on his company's financial year. Since the above mentioned period falls in previous financial year, there could be as issue but your friend can always claim upto 28K as dividend from his LTD. company. All he would then need is the dividend voucher.
Also remember, you don't have to show regular deposits of small amounts. You can also show one big chunk in your account.

i need to know following,
need to apply for extension, LTD company established in december 2007,but business starts in march 2008 practically,now my frd is the director and he wants to claim wages from december 2008 to june 2009+dividend(once account filed which is near 11k).he havnt took wages as he is the owner just started from december 2008.

my question is that as dividend given from profit and company accounts made for 1 year from december 2008 to december 2009,can he add dividend as law states 12 out of 15th,as he is applying in june 2009 how he can get dividend from period between december 2007 to december 2008.Did HO consider his dividend or not?He hasnt taken any dividend yet have plan to take once accounts filed in may.

Dividend calculated for 1 year,can he take it in?

[ssoct98@hotmail.com]

little confused,can you explain bit more,he hasnt put anything in shape of dividend,he has plan to put now which is 11k at once,but his account period is december 2007 to dec 2008,so can he put 11 k in may or june as dividend.he hasnt put anything in december in shape of dividend,as accounts ready now.
PLease suggest

[ssoct98@hotmail.com]

Anyone plz reply.

[ChetanOjha]

What do you means by "put 11k"? Sorry I am getting confused.

Do you means your friend has not taken any dividend from the company and is planning to take 11K out now(after accounts are ready)? If that is the case, he can still do this in current financial year. You don;t have to dispurse profit of the company immediately.

little confused,can you explain bit more,he hasnt put anything in shape of dividend,he has plan to put now which is 11k at once,but his account period is december 2007 to dec 2008,so can he put 11 k in may or june as dividend.he hasnt put anything in december in shape of dividend,as accounts ready now.
PLease suggest

[ssoct98@hotmail.com]

yes he has plan to take after company accounts,so according to you its feasible not to show profit ,but if HO ask for company accounts what he say there,and if profits shown in accounts than HO can divide it monthly and give him only what came in 12 out of 15th criteria.plz advise

[ChetanOjha]

You are confusing between "Profits" and "Dividends". Profits of 120K doesn't mean you will get 10K of dividends per months. HO will not consider profit "of the company" to grant Visa to individual. Money should be shown in the individual's account and not in the company.

Also make sure your friend show earning from "his" bank account.

yes he has plan to take after company accounts,so according to you its feasible not to show profit ,but if HO ask for company accounts what he say there,and if profits shown in accounts than HO can divide it monthly and give him only what came in 12 out of 15th criteria.plz advise

[ssoct98@hotmail.com]

LOOK he hasnt taken any dividend at all,my question is that if he took dividend after accounts prepared or he can take without accounts,if he take without account which is known as interm dividend,HO can ask how u calculate your dividend where are accounts,and if he shows accounts which shows december 2007 to december 2008 than they calculate as per 12 out of 15th and alot him points accordingly.
I am trying to explain you my question,definitly he put dividend in his account from company,but my q is that did HO consider its dividend if he put in may or june 2009,bcz accounts are from december 2008 to december 2009,maximum he can extend as company house uptill 31st march,as profits declared on accounts are between dec 2008 to march 2009,and he is taking dividend in may 2009 which is 11k as his projected profit is 22k(2 partners his share will be 11k).
so HO can say why u taking dividend from the profit which is calculated between dec 2008 to march 2009.

plz advise

[ChetanOjha]

Since you have already prepared account,you can take dividends now. Even without preparing accounts you can take dividends. The only thing you need to make sure is that you take care of other tax contributions.

LOOK he hasnt taken any dividend at all,my question is that if he took dividend after accounts prepared or he can take without accounts,if he take without account which is known as interm dividend,HO can ask how u calculate your dividend where are accounts,and if he shows accounts which shows december 2007 to december 2008 than they calculate as per 12 out of 15th and alot him points accordingly.
I am trying to explain you my question,definitly he put dividend in his account from company,but my q is that did HO consider its dividend if he put in may or june 2009,bcz accounts are from december 2008 to december 2009,maximum he can extend as company house uptill 31st march,as profits declared on accounts are between dec 2008 to march 2009,and he is taking dividend in may 2009 which is 11k as his projected profit is 22k(2 partners his share will be 11k).
so HO can say why u taking dividend from the profit which is calculated between dec 2008 to march 2009.

plz advise

[ssoct98@hotmail.com]

Accounts not ready yet,thats why i am asking is it important to make accounts,or he can take without accounts,please reply in detail and what other tax contribution you are mentioning?

[ChetanOjha]

Let me try to explain things...

1.You do work and invoice your client on your company's behalf. Lets say you bill your client for 20 days @£100/- per day rate. Total Invoice amount £2000 + VAT. [For 12 months this would be £24000k +VAT]
2.You receive money from your client in your "company" bank account.
3. Now from the money you receive from your client, you have to pay VAT(that is first deduction).
4.Since you are working as a director of the company, you should be receiving some salary. Presuming you will take minium salary(to save NI and Tax) e.g. £12000 per annum. This will £1000/month (Gross). Net salary from this £1000 per month would approx. £850 (and £150 gross to Tax and NI which company will deduct at source).
5.Now the net after directors salary you are left with is £24k-£12k=£12k. Out of this £12k you have to pay employer's contribution of NI+Tax, Corporation tax. and other deductions which you might incurr on company's behalf.
6. Whatever now left is your "Profit".You can take dividends from this amount as suggested by your accountant.Maximum tax free dividend you can take is 28K per year.

Now to take dividend from your company you can take it two ways:

1. You can also take dividend after accounts are prepared by your accountant i.e. from the net profit of your company.
2. OR you can always calculate approx. in advance and pay yourself per month (or in chunk) to yourself. BUT this amount should not me more than what you will earn. Make sure you do not take more than required dividend.Speak to your accountant and he will advise you how much you can take monthly(or in chunk) BEFORE accounts are prepared.

I hope this will make things clear.

Accounts not ready yet,thats why i am asking is it important to make accounts,or he can take without accounts,please reply in detail and what other tax contribution you are mentioning?

[ssoct98@hotmail.com]

one last thing,as i said accounts are going to be made between december 2007 to december 2008 or we can extend it to march 2009,and profits declared are 22k which is 15th month,when he go to HO in june,they can ask him accounts,if he show accounts they can see profit is 22k,they divide it by 15 and alot him only what came in 12 out of 15h creiteria,as monthly it is 1466.65/month,may be they ask him as its previous accounts you cant take it.
Reply for that i became all clear,much clear from previous but thats the last q.

[PinkFloyd]

Thanks a lot Chetan!

I am learning more about accounts here than any other forum. From your reply, I gather that the "net profit" term in the guidance notes means profit before the dividends have been paid off. So net profit here is basically turnover - expenses -taxes.
Please confirm if my understanding is correct.
(I spent the weekend searching the board but could not find an explanation. )
Wondering what is the buzz word for profit after dividend has been taken out. Is it retained profit or shareholder fund.
I will use "net profit" figure calculated this way to claim points. I will be producing company accounts and accountant letter as proof.

Cheers!

[ChetanOjha]

I don't think HO will divide profit by 15 to figure out monthly profit. It doesn't work that way. The Profit/Loss statement will be prepared by your accountant.You accountant will put all details in P/L statement from which you will be allower to take money out. You can take total dividends (max 28K) in even in one go into your bank account.

one last thing,as i said accounts are going to be made between december 2007 to december 2008 or we can extend it to march 2009,and profits declared are 22k which is 15th month,when he go to HO in june,they can ask him accounts,if he show accounts they can see profit is 22k,they divide it by 15 and alot him only what came in 12 out of 15h creiteria,as monthly it is 1466.65/month,may be they ask him as its previous accounts you cant take it.
Reply for that i became all clear,much clear from previous but thats the last q.

[ChetanOjha]

I am learning more about accounts here than any other forum. From your reply, I gather that the "net profit" term in the guidance notes means profit before the dividends have been paid off. So net profit here is basically turnover - expenses -taxes.

Correct. and from this net profit (or say Profit) you will take out dividends.

Wondering what is the buzz word for profit after dividend has been taken out. Is it retained profit or shareholder fund.
I will use "net profit" figure calculated this way to claim points. I will be producing company accounts and accountant letter as proof.

Use dividends vouchers instead of providing company accounts to HO.

[ssoct98@hotmail.com]

ok understood,another question,can you explain this ,its from UKBA site.

What the dividend vouchers must show,whats the meaning of cover the whole period claimed?thats confusing us.

Dividend vouchers must show the amount of money paid by the company to you, normally from its profits. They should confirm both the gross and net dividend paid. You should provide a separate dividend voucher or payment advice slip for each dividend payment

Gross dividend is the share of a company's profits, paid to people who have invested in it (for example by buying shares), before any official deductions have been made. Net dividend is the amount the investor actually receives after deductions have been made.A share of a company's profits, paid to people who have invested in it (for example by buying shares).An official document showing the amount of dividend earned both before and after official deductions have been made (for example tax). (See dividends.)

[ChetanOjha]

Once you have profit in your company say 90k and you are two partners, each of you should get dividend of 45 each.
Now this 45K is the Gross dividend (for you). But since you can only claim 28K dividends tax free, for the remaining amount i.e. 17K you have to pay tax to HMRC. Let say this tax on 17K is 5K so the amount you will get is 12K. Hence the total dividend you earned is:

A. Company Profit : 90K.
B. Two Partners : 45K each. (This is gross)
C. Tax free dividends(out of 45K): 28K
D. Taxable dividend(B-C)=17k
E: Tax on dividend i.e. on D=5K
F: Total Net to you in your bank = C+ [D-E] => 28K+12K=40K. [This is the amount you can claim in your salary for point calculation]
Your dividend voucher will show all the above details. You just need to ask your accountant.

I hope this is clear now. You can also speak to your accountant,who is preparing your account, for more details information.

Note**: Figures mentioned above are for illustration only except 28K tax free allowance(on which you pay little tax).

ok understood,another question,can you explain this ,its from UKBA site.

What the dividend vouchers must show,whats the meaning of cover the whole period claimed?thats confusing us.

Dividend vouchers must show the amount of money paid by the company to you, normally from its profits. They should confirm both the gross and net dividend paid. You should provide a separate dividend voucher or payment advice slip for each dividend payment

Gross dividend is the share of a company's profits, paid to people who have invested in it (for example by buying shares), before any official deductions have been made. Net dividend is the amount the investor actually receives after deductions have been made.A share of a company's profits, paid to people who have invested in it (for example by buying shares).An official document showing the amount of dividend earned both before and after official deductions have been made (for example tax). (See dividends.)

[Sten]

claim 28K dividends tax free... 28K tax free allowance

Where did you get this idea from !? You pay 10% on dividents, up to 28K, and 32.5% on everything higher than that. There is no 28K "tax free" dividends allowance. The only one is personal allowance, circa 6K per tax year ..

[ChetanOjha]

Correct. Thats what I said...the figure above were for illustration.

Note**: Figures mentioned above are for illustration only except 28K tax free allowance(on which you pay little tax).

[ssoct98@hotmail.com]

I am clear on all,but again last but the least question is that how HO calculate my earning,as dividend which took is based on the profit earned last year which dont come in 12 out of 15th creiteria,even if i took interm dividend they can ask which basis you took it.
On UKBA its written dividend voucher must show the whole period claimed,my q is still same as dividend come from profit so can they count it as my earning or not.what period i show if i took dividend in june.

[ChetanOjha]

Your dividend voucher will have period(I guess) for the period your claiming. It doesn't matter for which period you are claiming for. All matter is when do you get money in hand/bank. It is obvious that you can only claim profits quaterly/half yearly or annually. Since you are claiming dividends from perious period but paid now, it will be considered (I guess) in the current period only. It only matters when do you get money in Bank.

Secondly, HO will not calculate anything as HO do not have visibility of your business. You have to do all caculation(as it is your earnings) and explain it to them in your cover letter.To explain your facts, speak to your accountant and get letter,dividend voucher from him.

Make sure you explain things clearly in your cover letter supported by documentary evidence and you should be fine.

I am clear on all,but again last but the least question is that how HO calculate my earning,as dividend which took is based on the profit earned last year which dont come in 12 out of 15th creiteria,even if i took interm dividend they can ask which basis you took it.
On UKBA its written dividend voucher must show the whole period claimed,my q is still same as dividend come from profit so can they count it as my earning or not.what period i show if i took dividend in june.

[ssoct98@hotmail.com]

Thanks alot,i inform you abt outcome.

[ssoct98@hotmail.com]

Do u extended on dividend chetnojha.

[ChetanOjha]

sscot, I have not extended on dividends although I run my own limited company. The reason for that: when I got my HSMP there was no option of using dividends as earnings. because of that reason I kept my account straight and paid myself straight 40K salary and needless to say paid bl*&£y high tax and NI too.

Do u extended on dividend chetnojha.

[fahadz1]

just a quick question.


I am showing busienss throught limited company from feb 09 to may 09.

i have earned 6000 in these months and i have taken 650 as a divident in march 09 and remaining (making to the required amount) taking in may 09.

Will these dividend is acceptable ??????/ this all i am doind caus emy accountant told me to do so !

Regards,