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Dividends across 2 tax years.

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    Dividends across 2 tax years.

    Is it legal for a Ltd with 2 directors (equal quantity of ordinary shares) to issue a dividend, on, say, 5th April (last day in year) so one director can get theirs on the 5th, and the other on the 6th, for tax purposes ... since I believe that for personal income the date is the date received, not the date the dividend was declared ? - or does the date need to be the same for both parties ??

    Cheers

    #2
    You can pay them when you like, but the date they are declared is the date the tax is due.

    Corporate taxation 101
    Blog? What blog...?

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      #3
      If they both have the same share class how can you do that. Either you declare a div to all on the same day or none

      Comment


        #4
        Originally posted by NowPermOutsideUK View Post
        If they both have the same share class how can you do that. Either you declare a div to all on the same day or none
        The OP seems to be saying that they wish to declare the dividend on the 5th April, but actually pay one director the dividend on the 5th, and pay the other on the 6th. They're querying whether director 1 will be liable for personal tax on it in the 2020-2021 tax year, and director 2 will be liable in the 2021-2022 tax year.

        Like if BT declare a dividend in March, but you don't actually get the money into your account until May.
        Down with racism. Long live miscegenation!

        Comment


          #5
          I would imagine that the personal tax would be based on the date of declaration.
          However I have no evidence of this, and if a personal tax investigation is done the date of payment is the first place HMRC would look. I’m always careful to make sure that any end of year dividends are done a couple of days early to make sure than any delays in banks clearing don’t murky the waters.

          What does your accountant say?
          See You Next Tuesday

          Comment


            #6
            The dividend is taxable when it is first made available to the shareholder (i.e., declared as being payable). The date the documents are prepared doesn’t matter. The date the payment is made doesn’t matter. What matters is the date that the documents declare the dividend as being payable. For accounting purposes, once that date is reached, it appears on the DL account until the payment is made. Interim dividends are taxable on payment date, but you cannot choose two separate dates for two shareholders holding the same class of shares, so that won’t work either. In summary, no, your plan won’t work.

            Comment


              #7
              Could you not rebalance the shareholding to distribute the bulk to one of the directors.

              Comment


                #8
                Originally posted by rawly View Post
                Could you not rebalance the shareholding to distribute the bulk to one of the directors.
                If you did it once on a permanent (or semi permanent) basis and the shareholders are husband and wife not a problem but you would need a very good reason to change it again afterwards.

                So I doubt it would solve the OPs problem - avoiding tax is not really a valid reason to change a company structure.
                merely at clientco for the entertainment

                Comment


                  #9
                  Thanks for the help.

                  Looks like another of my plans is not feasible....

                  Comment


                    #10
                    Originally posted by jamesbrown View Post
                    The dividend is taxable when it is first made available to the shareholder (i.e., declared as being payable). The date the documents are prepared doesn’t matter. The date the payment is made doesn’t matter. What matters is the date that the documents declare the dividend as being payable. For accounting purposes, once that date is reached, it appears on the DL account until the payment is made. Interim dividends are taxable on payment date, but you cannot choose two separate dates for two shareholders holding the same class of shares, so that won’t work either. In summary, no, your plan won’t work.
                    What is the DL account? Where can I check it?

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