New FLR HSMP - Dividend income acceptable if part of income

I found the following from the guidance notes:

38. ……If the company you work for pays part of your income in dividends then you should provide evidence that this has been declared as earnings. This should be in the form of either personal tax returns or or corporate tax voucher from the company.

39. …..If shares or dividends are part of your earnings package they must be shares or dividends from the company you are working for or running. You must provide evidence of earnings made on the shares or dividends and evidence that it is derived from the shares or dividends in the company you work for or run. Dividend vouchers will be assessed if they form part of the earned income and not dividends from investments.

This shows dividend income is acceptable if it is part of your earnings.

Under the new rules for HSMP, I will need to include my dividends to meet the earnings threshold. However, I think I need to prove that tax has been paid on them.

I'm director of a limited company so my accountant says I won't get a "corporate tax voucher" and that all I can provide is photocopies of the minutes from directors meetings where the dividends were issued. This doesn't sound like it will meet the HSMP standards.

What have others provided for initial HSMP to meet this requirement?

I'm director of a limited company so my accountant says I won't get a "corporate tax voucher"

Utter rubbish! Who is the Company Secretary of the company? Contact that person and point out that a company is obliged to issue a dividend voucher every time a dividend is paid.

(1) I have received Tax vouchers showing the Dividend details, and Tax credit. My Company has issed 'D' share on which dividends are paid based on the income generated by me through contracts. Are these corporate Tax vouchers within the meaning of HSMP Guidelines?

(2) In order to claim points for earning under HSMP, should we pay tax on the dividends at Personal income tax rates or at Dividend tax rates? Dividend tax is usually 32.5%, and with 10% already deducted at source, we need to pay remaining 22.5%.

Are these corporate Tax vouchers within the meaning of HSMP Guidelines?

Yes, and for UK tax purposes the amount of taxable income is the total of the actual amount of dividend paid plus the amount of Tax Credit attached to that dividend.

In order to claim points for earning under HSMP, should we pay tax on the dividends at Personal income tax rates or at Dividend tax rates? Dividend tax is usually 32.5%, and with 10% already deducted at source, we need to pay remaining 22.5%.

You should pay whatever is due in your circumstances. If you are into higher rate tax then in respect of UK dividend income chargeable at higher rates, the extra to pay is indeed 32.5% less 10% = 22.5% of the gross dividend income as described above.

Or in other words 22.5% of the 90% you actually received as dividend income from the paying company ... which you will see is 25% of the amount received .... 22.5%/90% = 25%.

But just to make it clear, it is the gross amount of income ... not the amount after tax ... that is important in the HSMP calculation.

Thanks very much John for your instant reply.
Your comments are very useful.

Ashwin.

In view of the above, I am concerned that my accountant is not giving me the best advice, especially because I don't think they have many clients from outside the UK. (They also told me that certified copies of documents would be okay for HSMP which I know is not the case.)

Can anyone recommend a good limited company accountant, especially one who works with hsmps?

I recently stamped HSMP. I am planning to go to SJDAccountancy. Is this good accounting company?

My plan is to declare my salary as 40,000 pounds per anum. Even I pay more tax, I think it will ensure my HSMP extension.

Also I am planning to pay less for current year, keep money in Company Account and pay more for the year of HSMP extension assessment. Do you guys think this approach works?

At workpermit.com we are getting a lot of queries from contractors whose client billings meet the income requirements, but whose accountants are not geared to providing the sort of backup documents that the Home Office require.

Those who have one man companies can usually overcome the issue, but compostite companies often pose larger problems. This is particulary the case for online-administered companies.

If anyone needs advice, we can give informal feedback on the suitability of an acocuntant and, if needed, suggest a suitable specialist