Dividend waiver practicalities

Dividend waiver practicalities

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Where a shareholder A has signed a dividend waiving his right to all future dividends, should future minutes
and EGMs declaring dividends simply carry on declaring £X per share as before without reference to the waiver?

Should a dividend voucher be prepared for the waived dividend? I am sure the answer must be no, but you never know!
rjd

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By David160
07th Apr 2005 23:02

Dividends on successive days
Ken,

With the £10k in distributable profits, why not

On day one, pay a dividend of £10k, £5k is waived, £5k is paid then,

On day two pay a £5k dividend, £2.5k is waived, £2.5k is paid then,

On day three, pay a £2.5K dividend £1.25k is waived and £1.25k is paid, etc.

Does the inland revenue regard the waived part of a dividend (which forms part of the profit and loss account) frozen for ever (or maybe a period of time) so that it can never be paid as a dividend but is paid on a liquidation, and then to whom? Or can a later dividend make use of it? Would this involve a further tax return entry?

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By AnonymousUser
06th Apr 2005 12:50

As the first answer suggests ...
... you have to ensure that the company has sufficient reserves to pay the whole dividend before the waiver - otherwise the Revenue regard this as a settlement. Thus if the company has distributable reserves of £10k you cannot declare a dividend of £20k to which one of two 50% shareholders waives entitlement so that the other shareholder receives the whole £10k available - this is the same point as below but put differently. Thus you would have to decalre a dividend of £10k and after the waiver will only be able to pay £5k to the other shareholder. See Tax Bulletin 64 Example 3 for further info. If you do pay dividends in excess of what could be paid without the waiver the Revenue's view is that the proportion of this needs to be entered on the return of the person waiving the dividend - as shown in the example.

A dividend waiver more than 12 months before the dividend has accrued is also a transfer of value for IHT but don't ask me how you value it. If the waiver has been properly made by deed, don't forget this is legally enforceable and therefore may not be advisable in many circumstances.

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By AnonymousUser
04th Apr 2005 15:24

Thanks
Jonathan,

Thanks for that.

My minutes refer to a dividend per share (rather than a total net amount), so I think its Ok not to refer to the waiver at all.

As the waiver is in place, the relevant shareholder will simply not take up his entitlement.

I agree there's no harm noting that no revocation was received - however, the ir could not make any capital out of that being absent as its a matter of fact whether a revocation was or was not received (viz the dated notice addressed to the company reovking the waiver)

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By vowlesj
04th Apr 2005 14:42

waiveng bye bye to your dividend
To make sure that you don't have an issue with HMIT, I would ensure that the meeting minutes refer to
1) paying a dividend of £x, after allowing for the dividend waiver.
2) noting that the dividend waiver was in place and that no notice revoking the waiver had been received by the time of the meeting.

Otherwise you might find that HMIT expect to see the amount voted split by the number of shares in issue - and therefore a smaller amount of cash is available to be paid to the shareholder who hasn't waived the dividend rights! ie dividend voted of £100 on the 100 shares in issue. Amount paid is £50 as 50% shareholder has waived dividend rights.

As far as I am aware no dividend voucher is required - as no dividend is payable because of the waiver.

Incidentally, the waiver must have been executed as a deed before the meeting to propose the dividends.

Jonathan

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