Dividends
Introduction
We recommend that you declare dividends every month or quarter to keep your Director’s Loan Account to reasonable levels.
Before doing, so you need to check that you’ve got sufficient distributable profits.
You would then record this in QBO, and let your CFO360 UK Contact know that you’ve declared a dividend.
We cover all these points in the sections below.
Estimating distributable profits
Dividends can only be declared if there are sufficient distributable profits.
To calculate distributable profits, first ensure your bookkeeping is up to date.
Then, use our calculator, and see this video to see how to complete the fields in the calculator.
Recording a dividend in QBO
When you want to declare a dividend:
- Click on the ‘+ New’ button, and select ‘Journal Entry’
- Enter journal date of date that you want the dividend to be declared
- On 1st line, enter account of ‘Dividends paid’, enter the amount of dividend in the ‘Debits’ column and description of ‘Dividend declared’. If you’re VAT registered, select ‘No VAT (0% Sales)’
- On 2nd line, enter account of ‘Director’s loan account’, enter the amount of dividend in the ‘Credits’ column, and description of ‘Dividend declared’. If you’re VAT registered, select ‘No VAT (0% Sales)’
- Click on Save, then close.
Note that if you have more than one shareholder, there will be more than 2 lines in the journal, as the DLA will need to be entered for each shareholder, according to the proportion of their shareholding.
Informing your CFO360 UK Contact
When you declare a dividend, please let your CFO360 UK Contact know the following:
- Date of dividend
- Amount of dividend
They will then process two documents:
- Board minutes stating that the director(s) have approved the dividend
- Dividend certificates
When you receive these back from your CFO360 UK Contact, you just sign them then keep them in your records; we don’t need them back from you.
This is so that if HMRC were to ever challenge the dividend, you’ve got evidence that it was properly processed.
