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When is dividend taxable on individual

When is dividend taxable on individual

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when is a dividend taxable on the individual? Is it a)when the dividend is declared by the company, b) when the money is sent (say cheque written) to the individual, or c) when the individual pays the funds/cheque into his bank account?  So ie. can an individual influence the amount of taxable income by not paying in a dividend cheque until a new tax year.

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By Trevski
17th Feb 2014 11:19

When Declared

When declared. Dividends are often credited to DLA and drawn later, the taxable date is the date declared

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Replying to WhichTyler:
By johngroganjga
17th Feb 2014 11:21

Payment

Trevski wrote:

When declared. Dividends are often credited to DLA and drawn later, the taxable date is the date declared

Only if declared to be paid immediately.  If declared today to be paid at the end of February, the taxable date is the date of payment.

 

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Replying to lionofludesch:
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By sigcima
17th Feb 2014 11:33

Thanks

johngroganjga wrote:

Trevski wrote:

When declared. Dividends are often credited to DLA and drawn later, the taxable date is the date declared

Only if declared to be paid immediately.  If declared today to be paid at the end of February, the taxable date is the date of payment.

 

Thanks this makes sense
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By johngroganjga
17th Feb 2014 11:19

It's when the payment is made unconditionally.  No the shareholder does not postpone "receipt" of a dividend for tax purposes by sitting on a cheque until after 5 April.

If you had asked about the position when a company distributes dividend cheques by post on 5 April that would have been a more interesting question. 

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By Rammstein
17th Feb 2014 12:23

Staggered

So is it correct that a dividend voted at, say, the end of December 2013 and included in the December 2013 accounts could have three different payment dates stipulated? That's quite interesting if it can be spread over two tax years.

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By King_Maker
17th Feb 2014 12:30

Final or Interim dividend?
 

Final or Interim dividend?

 

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By johngroganjga
17th Feb 2014 12:31

If it was included in the 2013 accounts it would have had to have been paid in that year.  Remember that we don't provide for proposed dividends like we used to before the rules changed.

If you are thinking about a resolution voting a dividend to be paid by instalments on specified dates I am not sure whether that would work.  But it doesn't matter as there is no point.  If a company does not want a dividend to be shareholders' taxable income before the end of the tax year, let it vote the dividend after 5 April.  Easy. 

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Replying to Ammie:
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By ted.henderson
26th Feb 2014 12:14

john, can you clarify this remark

"If it was included in the 2013 accounts it would have had to have been paid in that year."

This seems to conflict with

http://www.icaew.com/en/members/practice-resources/news/dealing-with-div...

"When to provide for a dividend
If a dividend is paid in the year then, as long as there are distributable reserves (see below), there is little to debate in terms of the accounting. This ‘payment’ could be in terms of an actual bank payment or it could be an entry in the accounting records to the director’s loan account, coterminous with the decision to pay the dividend.
For dividends ‘paid’ after the year-end, reference needs to be made to accounting standards on provisions. These state that for it to be provided at the year-end there must be an obligation at the year-end.
A history of paying dividends does not generate an obligation; neither does a declaration of a dividend after the year-end. For a dividend to be provided at the year-end, it must be approved by the shareholders before the year-end."

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By bggoose1
24th Feb 2014 12:01

Final or interim?
 

The question above was not answered but it is vital to know the answer before you can reach the right conclusion.  Final dividends become a debt payable to shareholders once they have been approved by the shareholders (Leclerc Ltd v Pouliot [1924] 1 DLR 361). However, if a final dividend is declared under the terms of a resolution that states that it is payable on a future date then the debt is enforceable, and the dividend is due and payable, only on that later date.

An interim dividend becomes a debt payable to shareholders when it is paid, rather than when the board resolves to pay it. There is no legal liability to pay interim dividends, even when they have been properly declared, as the board can always rescind its resolution to pay an interim dividend at any time up to the time of actual payment (Potel v CIR).

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By taxguru
24th Feb 2014 12:18

Depends on interim or final divdend

I agree with the above comment which is the correct treatment.

Interim dividends are paid by the directors and will be taxable on the date it is actually paid by the company. Final dividends are declared by the shareholders and will be taxable on the date it is voted by the shareholders regardless when the payment was actually made.

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By Rammstein
26th Feb 2014 11:12

Apologies for the delay, the dividend voucher (I don't act for the company) states 'dividend for the year ended ......... payable to holders registered on ..............

It gives a dividend payable in total but then four dates of payment.  There is no mention of interim or final and it does not mention consolidated either.

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By bggoose1
26th Feb 2014 11:48

Board minutes

I think that you need to see what the board minutes state in relation to the declaration of the dividend as these should state if the dividend is final or interim. Hopefully these will clarify the position.

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By johngroganjga
26th Feb 2014 13:20

I meant that as a general rule (in the vast majority of cases) dividends these days are only accounted for in the year in which they are paid.  You highlight the only theoretical exception to this, which is where a final dividend is paid after the year end but was approved by shareholders before the year end.  I agree that is probably theoretically correct, but it hardly ever crops up in practice does it? I have never seen it.  So I stand by what I said as a general proposition, which will produce the right answer in over of 99% of all cases.

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