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Treatment of dividend from subsidiary company

How to account for dividend from subsidiary

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A wholly owned subsidiary is paying a dividend to its holding company.

My understanding that this is not subject to Corporation Tax by the holding company.  How should the dividend received be shown in the holding company’s accounts?  Should it be shown in the P&L as ‘other income / dividend income’ or elsewhere?

Will it then be deducted from profits in the corporation tax computation?

Just want to ensure we get it right, as not our normal bread and butter work.

Replies (5)

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By johngroganjga
16th Jun 2021 18:09

You include it wherever in the P&L account seems best to you, and yes of course it gets taken out in the CT computation.

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16th Jun 2021 20:22

What jurisdiction does the subsidiary report for tax within, UK or elsewhere?

If not UK then it is still more than likely that a dividend received from an overseas subsidiary will not be taxable within the UK but if relevant you really need to check and look at any relevant DTT to be sure.

(Certainly not an area of tax with which I have any experience)

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Replying to DJKL:
By Wilson Philips
16th Jun 2021 20:29

Agreed. It is often overlooked (granted, usually without consequence) that dividends are taxable, unless exempt - and not the other way around.

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By David Boorn
17th Jun 2021 10:49

Thank you for the information. Both copmpanies are UK based.

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By Paul Crowley
17th Jun 2021 15:24

In the good old days this was Franked Investment Income.
I would rename the account Dividend from Subsidiary.
But then I like accounts to be understandable at first glance.

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