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Dividend Vouchers: The annoying paperwork that could save you

Published on Monday, November 30, 2015

Written by Alex Cadman

What is a dividend voucher and do you need one? Our blog explains all so you can ensure your take home pay is legal and that you're covered should HMRC call.

The benefits of operating as a contractor are well known and enjoyed by many contractors and freelancers with the main one being increased take home pay.

By paying yourself a minimal salary and taking additional income as dividends through your own limited company, you can legally maximise your take home pay in a tax efficient way.

However, directors of limited companies need to keep records of all distributed dividends in the form of a dividend voucher along with meeting minutes from the date the dividends are distributed. Failure to do so could result in HMRC penalties, or worse, a conviction for tax evasion, as they may deem your payments to be Pay As You Earn (PAYE). The easiest way around this is by keeping a record yourself or appointing a contractor accountant who can do this for you.

Our blog runs through all you need to know about dividend vouchers and what you need to do to avoid running into issues with HMRC.

What is a dividend voucher?
A dividend voucher details the amount of money being distributed as a dividend. The purpose of the voucher is to inform the dividend recipient (yourself, in most cases) of the amount being distributed. These documents can be in either paper or electronic format, but records of the vouchers must be kept safe and on hand in case HMRC comes knocking.

What needs to be included on a dividend voucher?
A dividend voucher must show:

  •          The dividend payment date
  •          Name of the limited company
  •          Registered office address of the limited company (Usually your home address)
  •          Shareholder(s) name and the number of shares owned by the shareholder(s)
  •          Net dividend amount
  •          The tax credit*
  •          Gross dividend amount (110% of the net dividend)

 

* Tax must be applied to the gross dividend amount, which is the sum of the net dividend receive in addition to the national 10% tax. Dividends are taxed at 10% for basic rate taxpayers; therefore the notional tax above represents the tax paid on the dividends.

Why are dividend vouchers important?
Producing and keeping dividend vouchers is crucial as it ensures compliance with HMRC’s requirements relating to dividend distribution. Otherwise, dividends could be classed as salary and therefore would be subject to PAYE tax on the amount paid out.

 

So how can we help?

At Churchill Knight & Associates Ltd, we have been helping contractors and freelancers since 1998, which makes us one of the most experienced and professional contractor accountancy service providers. Our services include dividend vouchers, payslips, invoicing, payroll, bookkeeping and more. We are the all-inclusive payroll solution taking the hassle out of contractor accountancy. 

If your current accountant does not produce dividend vouchers for you, free of charge, give our experts a call on 01707 871610 or email enquiry@churchill-knight.co.uk or request a callback. 

If you enjoyed this blog, you may be interested in finding out more by reading Dividend Tax is changing: It’s time for tax planning

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