Holding Company knowledge

Holding Company knowledge

Didn't find your answer?

This is for knowledge really..

A colleague of mine has recently taken over a holding company and 2 subsidaries (holding co plus 2 pubs) The holding co holds 100% shares in both subs and pays over a dividend every month, to which the directors (x 2) take their salary/dividend out of the holding co.

Say for instance they pay over £ 5000 a month as a dividend to holding co, at the year end do you gross the payment up (90% to 100%) as you would in self-assessment?

If that is correct, how does this get shown on the CT600 and do the company get the tax credit towards the tax liability?

I dont have any clients with holding companies at the minute and is purely for knowledge, as i have never had to deal with in practice.

Replies (5)

Please login or register to join the discussion.

avatar
By User deleted
04th Oct 2011 20:31

Not taxable - probably

Dividends received by companies in such circumstances will almost always be exempt - but because the default position is that they are taxable you will need to check that the exemptions will apply (I'm pretty sure thay they will, but always dangerous to make assumptions).

That being the case, the dividends don't feature in taxable profits.

But you do need to enter the amount of grossed-up dividend on the CT600 - for the purposes of calculating marginal relief if relevant.

Thanks (0)
John Toon
By John Toon
05th Oct 2011 13:10

Dividends not taxable

Dividends paid between associated group companies, which is what you appear to have here, are not included on the CT600 at all and have no effect on marginal reliefs. This means therefore that you make no adjustment for grossing up.

This would only be done on Franked Investment Income, which are dividends received from none associated companies, such as an investment in a listed company for example.

Thanks (0)
avatar
By User deleted
05th Oct 2011 13:47

John

Thanks for putting me straight on that - of course dividends from 51% subsidiaries are excluded  for the purposes of calculating marginal relief - d'oh.

Provided, of course, that they are in fact exempt. There is every chance that they are - but it is not automatically so. What happens, for instance, if the parent company is small and the subsidiary is resident in a non-qualifying territory? The exemption at CTA 2009 s931B would not be available, in which case they would affect marginal relief by virtue of being included in taxable profits.

Thanks (0)
John Toon
By John Toon
05th Oct 2011 13:55

@BKD

Agree on your point.

 

Luckily I don't have to deal with too many groups with overseas subsidiaries. Even better we have a CT department that I can hand things over to when people want to quote tax act section numbers ;) - Phew

Thanks (0)
avatar
By aasiyah
12th Sep 2012 10:48

HELP WITH CT600

I have a holding company which has three subs.

the subs have all trading and making losses

the holding company itself doesnt do anything except "hold" the subs.

Do i file dormant or consolidated accounts for the holding company

 

Thanks (0)