Abolition of NCD rate for corporation tax

Abolition of NCD rate for corporation tax

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The pre-budget statement stated the NCD and 0% corporation tax rates will be abolished (replaced with a straight 19%).

Given the way ct relates to a financial year starting 1st April, I expect this change will apply from 1/4/06.

Is there anything in print to confirm?

If that is the correct date, are colleagues advising clients with profits < £50k to consider delaying dividends and paying in the period 1/4/06 to 5/4/06? Obviously, only where the tax saving is worthwhile.
hjk

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By User deleted
27th Feb 2006 11:58

Yes
If profits > £50k, there is no reason to delay paying dividends.

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By Richardrussell
15th Feb 2006 14:05

I think the previous poster is missing the point
and (therefore?) probably works for HMRC!

EDIT: the previous poster, DEREK, made rude comments and the post was quite rightly removed. END EDIT

If the underlying rate of tax is, say, 15%, a dividend declared now will increase the tax liability. Presumably if the underlying rate of tax increases to 19% anyway after 1 April, there is no difference in tax if a dividend is declared or not.

Therefore, on current information, it would be wise to consider delaying the payment of dividends.

However, not seen anything in print to confirm.

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By User deleted
27th Feb 2006 00:42

NCD abolotion
Any views on this please: do you agree there's no reason to delay (until after 6 April 06)paying a dividend if profits exceed 50K? Thanks.

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By Paul Soper
20th Feb 2006 19:20

1st or 6th?
Presumably we MAY have our answer on March 22nd but it has been noticeable in recent years that there is little consistency in the way date changes have been handled. All logic says that the rate will become 19% for all profits below £300,000 from 1 April 2006, increasing the effective liability on profits below £50,000 from that point onwards.

Certainly a dividend paid on or before 31 March will cause an additional liability if PCTCT are below £50,000 until that time. The question then becomes do you pay the dividend before 6th April, bringing the individual's income into the current tax year, or delay payment until 6th April onwards where the excess liability, if any, will be delayed by a year.

However, the Chancellor may yet have a further surprise in hand. The proposals for REITs include a mechanism for the application of a with-holding tax to be applied to what is, in all other respects, a company dividend, where a property-owning unit trust, which in reality distributes incomes as does any trust, is treated as a company and so its distribution carries a tax credit.

Will he introduce a general dividend withholding tax - and if so can he use this to narrow the gap between company dividends and profit share?

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