Our website uses cookies to store information on your computer. You may delete and block all cookies from this site, but parts of the site will not work as a result. Find out more about how we use cookies.
(Do not show this message again)
Shout99 - News matters for freelancers
Search Shout99 - News matters for freelancers
(Advanced Search)
   Join Shout99  About Shout99   Sitemap   Contact Shout99 18th Sep 2018
Forgot your password?
Shout99 - Freelancers, FO35, Section 660
New Users Click Here
Shout99 - Freelancers, FO35, Section 660
Shout99 - Freelancers, FO35, Section 660
Front Page
News...
  Business
  IR35
  Political
  Income shifting/S660
  Viewpoint
  IR591
  Agents
  Newsletters
  Shout99 calls
  Links
Freelancers' Shop...
Ask an Expert...
Letters
Direct Contracts
Press Links
Question Time
The Clubhouse
Conference Hall...
News from Partners
Accountants

Login
Sitemap

Business Links

Shout99 - Freelancers, FO35, Section 660
  
Shout99 - Freelancers, FO35, Section 660

News for the
Construction Industry

Hardhatter.com - News for small businesses in the construction industry

Powered by
Powered by Novacaster
So what exactly is this tax on dividends?
by Susie Hughes at 09:04 26/03/04 (News on IR591)
Simon Sweetman, a member of Shout99's 'Ask An Expert' forum and Vice Chairman of the Federation of Small Businesses' taxation unit outlines his view of what is known so far on the new 'tax on dividends'.
Simon Sweetman, a sole practitioner, said:

"We now have some ideas about how the tax on dividends, announced at the budget, will work. It is of course not a tax on dividends - it is a tax on profits which is triggered by a dividend being paid.


Simon Sweetman
"The new rules mean that from 1st April 2004, all distributed profits will be liable for a minimum rate of corporation tax of 19 per cent. It uses a slightly complicated mechanism, best illustrated by an example.

"On profits of 40,000 - the first 10,000 is taxed at 0 per cent and 30,000 at 23.75 per cent, giving a corporation tax bill of 7,125 (an effective rate of 17.81 per cent.) If 20,000 is distributed, 20,000 is taxed at 19 per cent and the balance of 20,000 at 17.81 per cent. The final tax bill is 3,562.50 + 3,800 - a total of 7,362.50 or an increase of 237.50.

"The Inland Revenue has confirmed that payment of dividends to directors out of past profits will not be exempt.

"The 19 per cent Distributive Tax is a less draconian measure than removing the zero rate of corporation tax altogether or imposing National Insurance Contributions on dividends. The maximum extra tax bill is 1,900 and companies making a profit of more than 50,000 a year will not be affected at all.

"But the hardest hit will be very small businesses - those with profits of 10,000 to 15,000 a year which they cannot afford to leave in the company. For these businesses, there may still be an advantage in incorporation, but it will be less than it was and may not offset the extra administrative costs faced by companies of around 750 a year.

"Businesses this small were enticed into incorporation in the first place because of the tax advantages on offer. Somebody living on this level of profit could not afford to pass up a saving of over 3,000, but now sees that possibility recede into the distance. They may now have the added trouble and expense of dis-incorporation. The Chancellor has done them no favours.

"Because this is a targeted measure it does not affect the operation of IR35 or the settlements legislation. But the Chancellor also announced a wider review of ‘the interaction of the tax system of definitions of income of self-employment, and the remuneration paid to owner-managers.’ The FSB welcomes this review provided it is to be a real debate that addresses the underlying problems, rather than another knee-jerk reaction from the Treasury."

--
If you wish to comment on this article, please log in and use the Reply button below. Registering is free and easy - see 'Join Shout99'.
-
Susie Hughes Shout99.com

View Comments (Flat Mode) Printer Version
Mail this to a friend
So what exactly is this tax on... Susie Hughes - 26/03
    Not the only reason for incorp... btm - 26/03
    Distributing retained profits as00ma - 26/03
       distributing retained profits SimonS - 26/03
          Double taxation? ferretktf - 26/03
             double taxation ? SimonS - 26/03
          double taxation piknmix - 26/03
             double taxation SimonS - 26/03
                not currently taxed when distr... yarwell - 26/03
          So whats the point of being in... morphic - 28/03
    Not all low profit companies w... steh - 28/03
 
Copyright 1999-2018, Shout99.com | All Rights Reserved
Privacy Notice and Terms of Use