DIVIDEND WAIVERS

DIVIDEND WAIVERS

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Has any member experience of dividend waivers. HMRC make reference in there on-line guidance, that continuous use of dividend waivers, will render such transations liable to trhe settlements legislation. Even though the dividend and the associated waiver has been completed legally.Has anyone experince of HMRc applying settlements to these situations?

Many thanks

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Jennifer Adams
By Jennifer Adams
15th Feb 2012 14:06

Refer to my article on this subject - link below

https://www.accountingweb.co.uk/topic/tax/dividend-waivers-get-details-right/481882 

Check out my article as above - there is a section headed ' When will HMRC become interested' which deals with this point.

 

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By LancsAccountant
22nd Feb 2012 21:59

Dividend waiver

Jennifer, many thanks

re: point 4 - continually using a waiver.

What happens if a minority shareholder, waives there right to receive a dividend each time a dividend is declared.

Being a minority shareholder, they cannot stop the dividend being declared. But if that person doesn't want a dividend ( poss because the dividend will take them into a higher tax bracket), what can HMRC do in this situation?

I am not suggesting a re-distribution of the remaining dividend, but simply that 1 party waives some or all of their dividend. The waived amount being left in reserves.

eg Co make £20k post tax profits .

shareholders are man /& wife

MrX = 670   MrsX = 330   £1 ordinary shares

Dividend of £10 per share declared = total dividend of £10k .

MrsX waives her right on the whole dividend, as she has a very profitable sole trader business and doesn't need/want the dividend. Her div'd is left in the Co.

Mr X just received £10 per share on his 670 shares.

Next year exactly the same happens, and the year after that.

Clearly MrsX is 'waiving' to give herself a lower tax charge

What would HMRC be likely to do, in this situation?

 

 

 

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