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bigduckontax, Accountant
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My question relates to the treatment of shares and dividends

Customer Question

My question relates to the treatment of shares and dividends in my company accounts - I use the HMRC on line CT600 facility which I know does not have all the features and categories of some commercial software. From previous advice from Just Answer, I
do understand that I need to report the balance of the shares we hold at cost under Intangible Assets with some accompanying notes. I understand that any gains or losses on sale of shares should be shown in the P and L account. But under which category? It
is not obvious to me. An option would be to include the figure under turnover (we have holiday letting properties which is our prime business). Where do I report dividends? On the HMTC site it says specifically that this should not be under interest received.
So should it go under turnover as well? Do I use the gross dividend or net dividend figure? Lastly how do I account for the tax credit for tax already taken off the dividends? Many thanks Martin
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. You are correct that any capital gains or lasses from part of your profit and loss account and are included in your turnover figure. They are reported in box 16 of the CT600 also. Company dividends are Franked Investment Income and bear a notional Corporation Tax (CT) credit. They are entered at Box 39 of the CT 600 using the net figure. The tax credit thereon will be allowed automatically. As far as CT is concerned they are a dead duck as they have already suffered tax. I do hope my reply has been of assistance.
Customer: replied 1 year ago.
Hello Keith. Many thanks for the prompt reply and I am now up to speed on the treatment of the shares owned by the company under box AC43/42, and I understand that gains and losses go into box AC12/13. However I am still confused about the handling of the dividends. Last year we made gross from external investments 5526.51, net was 4992.71 with a tax credit of 533.80. There is also an equalisation figure of 265.80 which I do not fully understand.
I understood that box AC38/39 is for dividends paid by the company (which incidentally came to 10,000 last year). Surely the dividend income has to appear somewhere under turnover? Thanks Martin
Expert:  bigduckontax replied 1 year ago.
No, capital gains come under income as part of turnover whilst Franked Investment Income is tax free in the company's hands as the liability is covered by the notional tax credit. Here are the directions from the HMRC notes on completing the CT600: '38 Franked investment income Enter the amount of franked investment income received by the company during the accounting period.Franked investment income is the total of the amount of distribution in respect of which the company is entitled to a tax credit and the amount of the tax credit (S1126 CTA 2010).Your computations should include a detailed calculation of this figure. Exclude distributions made by certain other companies in the same group or by certain consortia company (S32(2) CTA 2010).' Tax equalisation occurs when an company sends employees overseas. I am at a loss to understand why any such figure has been included and the originator of the advising document should be challenged as to its inclusion.
Customer: replied 1 year ago.
Thank you.
So just to be clear then in Box AC38/39 in our case I would put in the 10000 (net figure) for dividends the company has paid out in the year and in addition the 4992.71 (net figure) for dividends received, total 14992.71?
The tax equalisation figure was related specifically to Unit Trust dividends but I will be ignoring that for this exercise.
Thanks again Martin
Expert:  bigduckontax replied 1 year ago.
Dividends paid out do not affect the CT computation; they are not allowable against CT. In box 38 you merely enter the net Franked Investment Income received by the company. The 10K net figure you mention is an irrelevance. Please be so kind as to rate me before you leave the Just Answer site, Martin.
Customer: replied 1 year ago.
Final confirmation please - do I enter the gross or net dividend income received in the turnover box AC12/13?
Expert:  bigduckontax replied 1 year ago.
HMRC says you enter the gross sum received viz. 'Franked investment income is the total of the amount of distribution in respect of which the company is entitled to a tax credit and the amount of the tax credit (S1126 CTA 2010).'
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3383
Experience: FCCA FCMA CGMA ACIS
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Customer: replied 1 year ago.
Thank you – I really appreciate your advice and will give an excellent rating. Best wishes
Martin
Expert:  bigduckontax replied 1 year ago.
Thank you for your excellent support.

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