Separate share classes and dividends

Separate share classes and dividends

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A, B and C have launched company with 33 shares each and with separate share class each but with same beneficial rights. All three have other employment earnings so any profits disributed from the company will be at each individual's marginal rate which may be higher rate. The purpose of the separate classes is to allow each individual flexibility over dividend extraction or not. Particularly in the opening years each individual's contribution to the earnings capacity of the business will vary and they therefore anticipate that profits available for distribution will not be equally shared but that one class may by agreement be voted a higher dividend than another so that for example the rate of dividend payable on the A's shares may be higher than that paid on B or C's. Will this cause difficulties with HMRC in any way?
dave smith

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Euan's picture
By Euan MacLennan
22nd Dec 2006 15:01

Yes and No
This arrangement is clearly for the purpose of avoiding NIC by paying remuneration by way of dividends. Will HMRC be unhappy if they spot it? What do you think?

Will HMRC do anything about it? Despite all the warnings we keep getting about alphabet shares, I have not come across any case where HMRC has pursued it. Just make sure that all the dividends are properly authorised by minutes signed by all the members and that they are properly evidenced with dividend vouchers.

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