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Dividends received by UK company and CT

Hi, can anyone help me re the treatment of Dividends received from UK listed companies by small companies ?

I know that the rules on Dividends and tax credits changed a few years ago and that individuals now pay Dividend Tax, but does that mean that companies now have to enter dividends income into the CT calculations and have them taxed at CT rates ?

Thanks for any help.

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25th Mar 2019 19:25

The default position is that such dividends are indeed taxable. However, there are a number of exemptions which means that in practice most dividends are not taxable.

Chapter 2 of Part 9A of CTA 2009 refers.

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By Matrix
25th Mar 2019 19:23

No, there were no changes to the taxation of dividends for companies. It depends if the company trades in shares but nothing has changed.

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to Matrix
25th Mar 2019 19:45

Thanks for that. The company receives property rental income and dividend income but also income from trading (software). The shares are held for the long term for income, does that count as "trades in shares" ?

I have had other advice that the dividend income now needs to come into the CT calculation, is there something definitive on line I can refer to ?

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By Matrix
to daverob1
25th Mar 2019 19:57

Given you have been doing this since 2015 then surely you know by now whether the company is trading in shares or not. I would only take advice from an adviser who has all the pertinent facts, if you are not happy with the advice of your current accountant then seek a second professional opinion. If you are researching yourself then I would look at the legislation rather than doing a search online. Also look at the badges of trade.

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25th Mar 2019 19:50

That doesn’t sound like a trade of dealing in shares. Whether or not the dividends need to be included in taxable profits will depend on whether or not the exemptions that I referred to above apply. You need to ask your adviser why they think the dividends are not exempt, if that is indeed what they are saying.

I have already provided you with the legislative reference.

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to Wilson Philips
25th Mar 2019 20:00

The shares held are all FTSE350 ordinary shares so are exempt :

"931FDistributions in respect of non-redeemable ordinary shares
A dividend or other distribution falls into an exempt class if it is made in respect of a share that—
(a)is an ordinary share, and
(b)is not redeemable."

I have been told that the removal of the dividend tax credit 2 years ago means that all investment income has to be brought into the tax calculation for the company.

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to daverob1
25th Mar 2019 20:07

You don’t say who is advising you and in what basis. If they are saying that the mere removal of the tax credit means that all dividends are taxable then you need to stop listening to them. Alternatively, ask them to explain why the exemptions referred to above do not apply.

I can’t offer any more useful advice than that.

I would just add that I think you’re looking at the wrong section. You mentioned small companies in your question, which suggests that section 931B might be more relevant.

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to Wilson Philips
25th Mar 2019 20:29

Thanks, will do and will refer to CTA 2009.

Yes 931B applies as an exemption to these dividends recieved and as that has not been amended I think that is the authority I need.

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