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Trading by way of limited company

Husband and wife are both currently higher rate tax payers

They wish to purchase a business by way of a limited company

The idea is that in a few years time they will both retire and become full time managers of the business being operated by the limited company

In the meantime any profit earned by the company will be assessed at the small rate of CT

But whether it is  Friday or as I age I become prone to increasing fears of paranoia but.....

In the above scenario can the company be forced to pay dividends during the period up until the date when they become full time directors ?

I regret what may seem a very basic question

Many thanks for any advice


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By DMGbus
27th Apr 2012 13:48

No compulsion to pay dividends since c 1970's

NOT a stupid question!

I think that it was in the 1970's that any tax-law compulsion to pay dividends was abolished.  In those days I recall it being called "apportionment" and ingenious calculations being necessary to demonstrate that a close company needed all of its cash resources for the trade so could not afford to pay dividends.

So, currently no obligation to pay dividends regardless of directors' employment or remuneration status within the company.




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By ruben
28th Apr 2012 14:26


Many thanks for this advice

Now that you have jogged my memory I remember doing these sort of calculations in the "good (?) old days

I suppose I was worried that there would be some recently introduced obscure clause in a Finance Act which "frowned upon" the scenario that I had outlined! 

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