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dividend waiver

dividend waiver use limited company


I have a client who is one of two shareholders in a small private limited company with recent annual trading profit of 60,000 pounds. He is also in full time employment earning 110,000 pounds (this income is not from the ltd company). The two shareholder split is 80:20 in his favour. He does not take any salary from the limited company but wants to take his share of dividends as needed.
Question: can he use dividend waiver every year so that he does not take any dividend and make it more tax efficient?

                  could dividend not be declared and only take lower amount if needed?


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11th Feb 2019 10:32

What makes you think declaring a dividend equal to distributable profits is mandatory?

The company can declare dividends in whatever amounts it chooses, provided it has the reserves to pay them. If the company declares no dividends, then that's fine, too.

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11th Feb 2019 10:43

If he waives a dividend he does so for all eternity, so it is lost to him forever. If his tax adviser is telling him that a clever way to avoid tax is to reduce his income he needs a new tax adviser pronto.

A proper tax adviser will focus on advising him how to maximise his after tax income within the law, not on how to minimise his tax liability regardless of all other consequences.

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to johngroganjga
14th Feb 2019 15:08

A waiver which provides for example that the holder waives any dividend declared in the next 60 days is only applicable to such a dividend. What it will do is effectively transfer a modest value to the other shareholder(s). For IHT , provided the period specified in that waiver is less than 12 months, this will not be a transfer of value[IHTA s15].
If the shareholder wants to keep the possibility of receiving the value he has given up, that will require a modification of the share capital into A and B shares, with profits credited to separate A and B reserves etc. Legal advice would be required.

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11th Feb 2019 11:45

Jjs wrote:

I have a client ...

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