Dividends

1. Calculating dividends - dividends are paid according to company law from the distributable reserves of the company.

As a rule of thumb, to calculate the distributable reserves of the company, which is the total amount available for dividends, take gross fees (excluding VAT) less any expenses (including salaries) and deduct 19% (to cover corporation tax on gross annual profits of up to £300,000 - if your annual gross profits exceed £300,000 then the deduction in respect of corporation tax will be higher, in which case please contact us).

This is the maximum amount that should be paid as dividends.

2. Paying dividends - dividends can be paid at any time by the company either at regular (e.g., monthly) or irregular intervals. To pay dividends:

(i) You need to set yourself up as a shareholder i.e. "Joe Bloggs Shareholder"

(ii) Via the cashbook you need to raise a Dividend transaction(s) as follows:

On the first screen select the party to receive the dividend i.e. you, and the category i.e. Dividends payable - all other fields should then "pre-fill" and you should hit the "continue" button";

On the second screen you should enter:

(a) the date dividend to be paid;
(b) the accounting year end - can be found in the Company details section;
(c) the dividend amount (if you are also paying dividends to other shareholders the dividends must be paid in exact proportion each shareholders shareholding i.e., if there are two shareholder each holding one share then divide the total dividend payment by 2).

You can then "save" the transaction.

If you are paying dividends to two or more shareholders please repeat this process for each shareholder.

(iii) You should then make cheques payable to you (and other shareholders). Do not forget to enter the paid details for the Dividend transaction.

(iv) To complete the paper work you can (from the cashbook for each Dividend transaction) produce a Dividend Voucher [V] and Minutes [M] of the Board meeting authorising the Dividend payment by clicking the respective buttons. These can be clicked and printed at any time. Therefore we suggest this is done at the end of the year when finalising all necessary paperwork.