What paperwork should I prepare when paying a dividend?
Check that the company has enough distributable profit, record the decision properly and prepare a dividend voucher for each shareholder being paid. Keep the paperwork with the accounts and match it to the payment. A bank transfer labelled dividend is not enough on its own.
These answers provide general information, not advice tailored to your circumstances. Rules can change and exceptions may apply — speak to the CASS team before making a tax, accounting or financial decision.
Check the profits and record the decision
Before paying a dividend, use reliable accounts to establish the profits legally available for distribution, allowing for losses and the company’s tax position. Cash in the bank is not evidence of distributable profit. Check the share rights and the company’s articles so the payment is made to the correct shareholders on the correct basis. Record the directors’ decision and keep appropriate minutes, even where there is only one director. Final dividends may also require shareholder approval under the articles. Retain the accounts or supporting calculation used for the decision. This gives a clear trail showing what was approved and why the company was entitled to make the payment.
Prepare vouchers and match the records
A dividend voucher should identify the company, the date, the shareholder receiving the dividend and the amount paid. Give the recipient a copy and keep one in the company’s records. Match the approved dividend, voucher and bank payment, or any credit to a director’s loan account, so the entries tell the same story. Dividends are distributions of profit rather than an expense reducing Corporation Tax. The shareholder’s personal tax treatment is a separate matter. Do not create or backdate paperwork simply to relabel unexplained withdrawals. CASS can help check the available profits and records before a dividend is paid, and explain how the payment affects the shareholder’s tax position.
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