What is it?
Dividend vouchers are a document given to shareholders of a business when the company declares a dividend to be paid out. They act as evidence of payment but are also very important for those completing self-assessment tax returns.
Who is it for?
Private and Public companies limited by shares.
How does it work?
When a company declares a dividend, and once it has been formalised by the board, dividend vouchers are prepared and sent to all those who will receive a payment. The voucher normally includes the date the dividend was declared, the date it was paid, the share class it was declared on and, most importantly, the amount that was paid.
This voucher is a shareholder’s evidence of a dividend payment, and they should retain it in their own records. This is particularly important for people who complete a self-assessment tax return, as they would need to declare dividend income on their return. Having a dividend voucher is an easy way of recalling the payment information, but they are also used to provide evidence to HMRC of dividend income, if there is an enquiry.
Companies are obliged to provided dividend vouchers to their shareholders if they are declared. If they do not do so, HMRC could deem payments out of the business accounts to be salary, and Tax/National Insurance would be due. It is therefore in the interest of the company to produce these documents, as well as the interest of the shareholders.
What should I do next?
Most companies declare dividends on a semi-regular basis (for example, once a month or once a quarter) or on an annual basis. You should decide which of these is best for your business, bearing in mind that dividends may only be declared from distributable profits.
Then, once the dividend has been declared and formalised, you should produce vouchers for each shareholder receiving a dividend payment and have this signed by a director and passed to the shareholders directly. It is recommended that companies also keep a copy of the dividend vouchers on file in case a shareholder needs a replacement copy.
If you have declared dividends in the past but not produced vouchers, you should also consider preparing these.
If you have any queries regarding the above or have any other questions, please do not hesitate to contact Charlotte Leslie on 01865 261119 or email.
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