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Dividend 10% Tax Credit

Example.

A limited company is going to pay a 10,000 Dividend to its one and only shareholder. The dividend meets all the legal requirements etc.

The dividend would attract a 10% tax credit being £1,111.11.

I have the following questions

1. Is the 10% tax credit actually paid over to HMRC, or is it only used as a notional figure to reflect the fact the dividend has been paid out of post tax profits?

2. Is the full dividend of £10,000 paid over to the shareholder?

3. In the companies accounts the £10,000 would be the figure recorded as the dividend payment?

Many thanks for your help

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By Old Greying Accountant
29th Jan 2013 14:45

Ok:
No, yes only notionalYesYes

But, on the shareholders tax return the dividend is recorded as £11,111 with a £1,111 tax credit. It is their top slice of income and if they are over the higher rate threshold additional tax will be due from them.

Good luck

Thanks (1)
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30th Jan 2013 10:16

and the acounting for the div

 

3. In the companies accounts the £10,000 would be the figure recorded as the dividend payment? 

*********************

so the payment of 10k [ Cr bank Dr P&L ] but what about the 1111 tax credit  accounting for completeness ?

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By Old Greying Accountant
30th Jan 2013 10:23

Nothing ...

... it is notional, Dr P&L with the dividend, Cr bank or Directors loan/Creditors (if not paid, often dividends are used to clear overdrawn director's loan).

The notional tax credit is irrelevant to the company.

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