Dividends

System

I have a slight query a Limited Co pays out a dividend each year to its shareholders - this has been paid minus a 10% tax credit and a statement sent to the shareholders to reflect this

Is this treatment correct - an auditor has informed me this should be paid to shareholders gross????
Thanks Millie

System

Re:Dividends

The dividend paid to the shareholder (i.e. net dividend) is paid to him "gross". The dividend is then "grossed up" again using a fraction of (paid x 100/90) when the shareholder's tax return is completed.

The auditor has said what he has because the dividend paid to the shareholder has had a 10% deduction - the question is who has this deduction been paid to, and how???

The 10% deduction is repayable to a basic rate taxpayer. The tax treatment of dividends is dealt with when the individual shareholder's tax return is completed. A higher rate taxpayer will be subject to additional tax payable on a dividend.

The auditor, therefore, is correct that dividends need to be paid gross and the tax element is dealt with under the self-assessment regime.

Kind regards
Steve

System

Re:Dividends

Everything Steve has said is correct.

The tax credit does not physically get paid anywhere.

If a £20k dividend is declared in the accounts then £20k is paid to shareholders, no tax should be deducted at source.