At which date would a shareholder have to consider a dividend as received for tax purposes? Is it the date the dividend is received in their bank or the date on which it is awarded?
If it is the awarding date then is there any reasonable/sensible limit between award and cash transfer? I'm looking at a situation where 10 months has passed as the transfer was forgotten and now the company wishes to make good but the shareholder is concerned about the effects. The amount should have been received in the previous personal tax year (March 2015) and the individual has not yet submitted their SA for this period.
Thanks in advance for any comments.
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What did the dividend voucher say as the payment date? I would tax it in the year it was awarded. It is very common for no cash to change hands on a dividend payment (just a credit to a loan account).
Thanks very much for the response. Totally agree that award date and cash transfer date will very rarely be the same day so I guess in this case my question was more whether 10 months is an acceptable gap for HMRC.
The voucher states the payment/award date of March 2015 and on this date the entry was made in to the companies accounts to credit the appropriate account so I'm hoping all is OK.
Better to be safe than sorry :)
It depends
Have alook at the this page in the company taxation manual:
http://www.hmrc.gov.uk/manuals/ctmanual/CTM15205.htm
it depends on whether the dividend is an interim or final dividend - interim dividends are treated as distributed when they are paid, final dividends are treated as distributed when they are declared, or the date on which they are due to be paid if that is specified in the resolution declaring the dividend.
not quite
Interim dividends are also treated as distributed when the funds are put at the disposal of the receiver - such as credited to a loan account. As long as they are able to draw them they are treated a paid. In this case you would also need to look at the accounting treatment of the dividend. Was there an entry to a loan account at the time the dividend was declared, was the dividend subsequently revoked, was the dividend merely accrued as a future debt or was it just ignored completely?
I'm not commenting on the correctness of any of these or otherwise but only payment or a clear loan situation is going to count in this instance. In all other cases some other event has to happen before he recipient can obtain their cash.
Regarding CTM15205, I meant to respond to this sooner.
CTM15205 is only relevant to when a company pays a dividend. It is not relevant to when an individual is paid a dividend, which is a different thing.
CTM15205 relies on CTA 2010, section 1168, which says that "for the purposes of the Corporation Tax Acts dividends shall be treated as paid when they become due and payable."
There is no provision corresponding to section 1168 that applies for the purposes of the Income Tax Acts, which means that dividends are paid for income tax purposes when they are paid, which is when the value of the dividend is placed at the individual's disposal.
The basic company law procedure for a quoted company to pay dividends is no different to that which applies to a private company, and there has never been any suggestion that ICIs (I know ICI does not exist anymore John, thank you) final dividends were paid (for Income Tax purposes) when the relevant meeting approving them was held.
Big posh companies ...
Big posh companies put the date AND the Income Tax Year on the voucher.