Historically many companies have written up board minutes and in some cases declared dividends retrospectively at the end of year, but times are changing!
In the age of cloud accounting and making tax digital HMRC will know exactly when entries are posted and when documents are signed.
Unreliable records were a major factor in Dr Maqbool Baloch v HMRC, Dr Baloch a locum doctor was forced to pay £0.5 million in tax and penalties!
Dr Baloch tried to argue that he was employed via his Limited Company – KSM Medics Ltd – but the paperwork didn’t tie up – there were board minutes for meetings which HMRC could prove didn’t take place. As a result he was treated as Self Employed because he ticked a box that said he was self employed for his agency work even though Dr Baloch argued this was not a contract.
From April 2019 Making Tax Digital will apply to VAT, this will give HMRC access to real time information direct from your accounting records and time stamped.
In order to avoid problems preparing or extracting monthly accounts will mean dividends can be declared in the correct time periods.