Dividends are a type of income that a shareholder can take
from the company.In order to calculate the dividend the company must have the
distributable profits and these are the profit after tax.
Most important thing to consider in case of dividends is
what the percentage of shareholding between the shareholders is. If the
percentage is 50% each between two shareholders than both shareholders will
receive equal dividends regardless of the workload, i.e. why the work needs to
be distributed too as it might lead to conflict at the time of declaration of
dividends.
Dividends can be at any part of the year and it is entirely up
to you as at the end of the day these are your own profits, but we recommend
that you take dividends quarterly so that we can prepare the management
accounts for you along with the VAT return and calculate the tax efficient
amount for dividend for you.Our tax advisers recommend that you keep some profit in the
company for tax planning and incase of fluctuation of income in coming months.
Our tax adviser London excellence accounting advises that director of the limited
company must understand that dividend does not affect corporation tax as it is
distributable profit after tax that is taken from the shareholders of the
business. Dividends only affect the personal tax computation and it must be
included in the taxable income of shareholder in preparing the tax return for
the tax year which runs from : 6th April till 5th April.
One last thing that I would like to include in Dividend
discussion is if you want to take dividends a document that must be signed and
produced by the accountant for contractor is the Dividend voucher.
Dividend voucher is the official document that shows the
percentage of shareholders, date of dividend taken, the company name,
shareholder details and must be signed by shareholder.
If you need more advice please contact us for more
information a 02034894704 or accounts@excellenceaccounting.com
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