Corporation tax
System
Posts: 100,534 🤖 Admin 🤖
A bit of an in depth corp tax question that HMRC were pretty unhelpful in answering!:
if I am doing a set of Ltd company accounts for say the fifth year of trading, adjusted profit for the current year is £15,000 and therefore is subject to starting rate relief etc. However, dividends paid were £20,000 and so have to be charged at 19%. But my dilemma is that £5,000 of that distribution is from retained profits and has therefore been taxed in previous years. So in computing corp tax payable do I:
Charge all £20,000 distributed at 19% (so that the £5,000 from retained profits will be taxed twice),
Charge just the £15,000 adjusted profits at 19%,
Or, is there some other way to charge the £15,000 at 19% and then a different percentage for the £5,000 distribution from retained profits (i.e. charge it at the difference between 19% and whatever underlying rate was charged in previous perids)?
HMRC led me to believe that retained profits cannot be distributed but surely that's not right?
Am about to launch into doing lots of accounts so want to get this straight in my mind first!!
if I am doing a set of Ltd company accounts for say the fifth year of trading, adjusted profit for the current year is £15,000 and therefore is subject to starting rate relief etc. However, dividends paid were £20,000 and so have to be charged at 19%. But my dilemma is that £5,000 of that distribution is from retained profits and has therefore been taxed in previous years. So in computing corp tax payable do I:
Charge all £20,000 distributed at 19% (so that the £5,000 from retained profits will be taxed twice),
Charge just the £15,000 adjusted profits at 19%,
Or, is there some other way to charge the £15,000 at 19% and then a different percentage for the £5,000 distribution from retained profits (i.e. charge it at the difference between 19% and whatever underlying rate was charged in previous perids)?
HMRC led me to believe that retained profits cannot be distributed but surely that's not right?
Am about to launch into doing lots of accounts so want to get this straight in my mind first!!
0
Comments
-
Re:Corporation tax
Have a look at this link it may help you do some calculations:
http://www.hmrc.gov.uk/news/ncdr.pdf
Have a look at the above as it has all you need to know regarding NCDs. You will also note from the above link that your adviser from HMRC who told you your company could not pay dividends out of retained earnings is talking rubbish! There is nothing (and never has been) anything to suggest a company is prohibited from paying dividends in excess of profits generated for a single reporting period provided it has sufficient reserves brought forward.
Regards
Steve
0 -
Re:Corporation tax
Useful guide that, thanks Steve.
Regards
Dean0