Get your kicks from a VAT 66!

If you travel or incur costs in the EU, it is now that time of year to make sure that you claim the VAT back on any of these costs, for example, hotel bills, conferences or exhibitions you have attended.

How do I make a claim? The first thing you need is a VAT 66 certificate from the Grimsby VAT Registration Unit, which can be requested by letter, fax, or email (they don’t provide a number for telephone requests for some reason). You will next need to get a VAT 65 application form, which is on HMRC’s website at http://www.hmrc.gov.uk/index.htm Remember that the VAT65 form must be completed in the language of the country you are claiming the refund from. This can prove difficult, but in a lot of cases, the actual amount of text you will need to write is minimal. Once you have both forms, you can then list all the invoices and VAT amounts, and send the VAT 65 and 66 along with the original invoices to the country’s tax authority. A list of the relevant addresses can be found in Notice 723 or on the HMRC website.

Tip 1 The period of a claim is a calendar year, and you have 6 months to make the claim. This means that you should have sent the claim by 30 June in the following year. Most countries are fairly stiff about the time limits and late claims are normally rejected, so make sure you make your claim on time.

Tip 2 The current paper-based process for reclaiming EU VAT is to be replaced by a fully electronic system from 1 January 2010. HMRC are still consulting on this, so those expecting to make a claim next year will need to keep track of developments over the summer.

When is Paying a Dividend "illegal"?

A dividend may be 'illegal', in that it is contrary to Company Law, when the proper procedures are not followed. If the Taxman examines the paperwork and decides the payment from your company was not a legal dividend he may treat the amount paid as a loan, or even as a bonus payment.

In both cases additional tax may be due from the company and sometimes from you.

To pay a legal dividend it is not sufficient just to write 'dividend' on the cheque stub or against the entry in director's loan account.

We recommend following these steps when paying dividends...

1. The directors should first review the profits available for interim dividends. This is not the same thing as cash in the bank, as you have to take account of other assets and liabilities. Those deliberations should be recorded as a formal board minute, so if the Taxman ever asks, you can prove the profits were there when the decision to pay an interim dividend was made.
2. If the final accounts for the year are complete and show the accumulated profit and loss account is positive, the directors can recommend the profits, which are not required for investment, can be paid out as a final dividend to the shareholders. The shareholders can either accept the directors' recommendation or suggest a lower figure of dividend. Both these decisions also need to be properly recorded at the time they are made.
3. Dividend vouchers need to be prepared when either a final or interim dividend is paid, for each shareholder showing the total due, the tax credit attached to the dividend and the date of payment.
4. The dividend should be paid. The cash can be transferred from the company's account by cheque or bank transfer into the shareholder's own bank account. If the shareholder is a director his account in the company books may be credited with the dividend due to him or her, but this needs to be done as soon as possible after the decision to pay a dividend is taken.

We can help you with all this paperwork, but it is important that the decision to pay a dividend is made in advance of any cash being paid out of the company.