Dividend Sacrifice

JodieR Registered Posts: 1,002
I was on a course a few months ago when dividend sacrifices were mentioned and I think it might benefit one of my clients now but I don't know much about it. Does anyone know where I can find out details of when/where/how it can be done and the risks/consequences associated with it?


  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 🎆 🐘 🎆
    In a nutshell:

    You can do it, but:

    You have to have the dividend waiver (if this is what you're talking about, apologies if a div sacrifice is a different thing) in place BEFORE you pay the dividends to the other shareholders.

    Also, you have to have enough profits to pay ALL of the dividends, including the ones that have been waived.
    EG: Retained profits of £100k, 2 shareholders 50/50, one waives his right to divs. The other one can only take 50k, he can't take more, as the company couldn't afford to pay all of the divs if the waiver wasn't in place.

    It's also desirable to have a good reason why you are doing it. "Because my wife is a basic rate tax payer and I'm a higher rate, so I waived my right" is not a good reason in the revenue's eyes. "Because I'm still working at my day job, but my business partner is now full time on the business, therefore she should get a higher share of the profits while she's working in the business more than me" is a good reason.
  • JodieR
    JodieR Registered Posts: 1,002
    thanks, that's exactly what i was after, maybe if I'd realised they were called waivers and not sacrifices I'd have been able to find out more info!
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