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Record keeping and dividends

Record keeping for a limited company

visual-diary-1728080__340.jpgAll types of business are legally required to keep a record of income and expenditure to be able to work out their financial accounts and tax returns. Limited companies have particularly strict record-keeping, accounting and reporting requirements for both Companies House and HMRC. A number of company records must also be made available for public inspection.

A private limited company must keep the following business records, where applicable:

  • Register of members (shareholders or guarantors).
  • Register of company directors.
  • Directors’ service contracts.
  • Register of Secretaries
  • Register of People with Significant Control (PSC)
  • Records of resolutions and minutes of meetings.
  • Directors’ indemnities – security against liability claims or legal costs.
  • Contracts relating to purchase of own shares.
  • Documents relating to redemption or purchase of own shares out of capital by private company.
  • Register of debenture holders.
  • Instruments creating charges and register of charges – i.e. mortgages or secured loans.

A company should also keep copies of its certificate of incorporation, the memorandum and articles of association and all share certificates (if applicable).

In addition, you'll need to keep accounting records for the following:

  • Goods and services bought and sold by the company
  • All forms of income and expenditure
  • Company assets, liabilities and credits
  • Inventory of all stock and assets owned at the end of each financial year
  • The stocktakings used to work out the inventory figures
  • Details of who goods and services were bought from and sold to, with the exception of retail sales.

The accounting records will be kept automatically as part of your bookkeeping and accounting service.  However, it's worth outlining the records you'll need to keep if you pay dividends to shareholders.

Dividend vouchers and board meeting minutes

storage-1209059__340.jpgOnce you've decided to make a dividend payment, the declaration must be recorded in the company’s minutes, and you must also provide each shareholder with a dividend voucher.

The voucher is a ‘receipt’ which should be kept in a safe place – it will be needed to complete the annual self assessment form.

With the increased use of web-based accounting systems, there is no requirement to send shareholders a physical dividend voucher, if it has been delivered electronically.

How are dividends taxed?

Before April 2016, a system of dividend tax credits existed, whereby dividends were ‘grossed up’ by 10/9 to produce the gross dividend figure upon which dividends were taxed. This decades-old system was scrapped from 6th April 2016 with a far simpler system.

The Dividend voucher

1) Limited company name and number
2) Shareholder’s name and address
3) Description of security (e.g. “Ordinary Shares”)
4) No. of shares owned at time of declaration
6) Amount of interim or final dividend paid
7) Date
8) Signature of company officer (typically a director)

Here's an example...

DIVIDEND TAX VOUCHER

[COMPANY NAME]

Dividend in respect of the year ended [COMPANY’S YEAR END DATE] payable to shareholders registered at the close of business on [DATE OF PAYMENT].

Shareholder: [SHAREHOLDER’S NAME]

 
100 £90 £9000

 

——————————

[DIRECTOR]

[DATE]

Keep this voucher in a safe place.

[COMPANY REGISTERED ADDRESS / COMPANY NUMBER]

The Company board meeting minutes

By law, the limited company must keep a record of the dividend declaration via board meeting minutes, signed by an officer of the Company (a director or company secretary if you have one).

You will typically record board meeting minutes, for example;

BOARD MEETING MINUTES

[COMPANY NAME]

 

Held on [DATE] at [ADDRESS]

Present: [NAMES OF ALL PRESENT]

It was resolved that the Company pay an interim dividend of £90 per £1 ordinary share in respect of the year ended [COMPANY’S YEAR END DATE] to those shareholders registered at the close of business on [DATE OF PAYMENT].

There being no further business, the meeting was closed.

——————————

[DIRECTOR]

[DATE]

[COMPANY REGISTERED ADDRESS / COMPANY NUMBER]