Crucial information on dividend payments for tax advisers

The Chartered Institute of Taxation wishes to alert Members to the fact that today the Inland Revenue have placed on their website 20 questions and answers dealing with the tax treatment of dividends paid by small companies. As announced in the Budget on 17 March 2004, dividends paid after 1 April 2004 may be subject to a 19% charge, where a company is paying the starting rate of corporation tax (currently 0%) or receiving marginal relief from the small company rate.

Nigel Eastaway, Chairman of the CIOT Technical Committee, said:

"It is important that Members realise that this charge will apply to all dividends paid by these companies on or after 1 April 2004, even where they are paid out of retained profits."

The website article points out that the information is based on the current proposed design of the measures announced in the Budget. The precise detail may be subject to change and cannot be treated as final until the Finance Bill has received Royal Assent.