PTP's Tax Tip No.7 ' Non corporate distribution rate with losses

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Q: My company always has profits in excess of 50,000 per annum with a similar sized dividend paid each year but this year an onerous contract will create a loss. Will I be affected by the 19% non corporate distribution rate on the 40,000 dividend I intend to pay this year?

A: No. If the company has no taxable profits this year then the NCD rate of 19% cannot apply to anything. The dividend will create a band of 40,000 at 19% to carry forward and the regulations are clear that in the following year, when the profits rise to exceed 50,000 again, this excess carry forward is wiped with no tax chargeable. Thus there will be no extra 19% tax to pay. If, however the losses are used to reduce an earlier or later period's profit to below 50,000 then that could result in the NCD rate becoming payab...

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