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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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How is UK dividend income treated for Corporation Tax

Resolved Question:

How is UK dividend income treated for Corporation Tax
Submitted: 7 months ago.
Category: Tax
Expert:  TonyTax replied 7 months ago.

Hi. My name is*****'m looking at your question now and will post my answer or ask for more information here in a short while.

Expert:  TonyTax replied 7 months ago.

Are you asking how UK dividends received by a company are taxed or how they are treated if paid by a UK limited company?

Customer: replied 7 months ago.
I run a small limited company ... it receives dividend income ... my question is for CT is the dividend income Franked Dividend Income and as such outside the CT calculation?
Expert:  TonyTax replied 7 months ago.

It will be franked income as the definition of franked dividend income is a dividend that has been paid by a company which has already paid corporation tax on its income. Take a look under the heading "Tax treatment of payments received by the UK holding company from its subsidiaries" here and here for more information.

I hope this helps but let me know if you have any further questions.

Customer: replied 7 months ago.
Is this the case post 6th April 2016?
Customer: replied 7 months ago.
My query relates to non-subsidiary investment dividend income
Expert:  TonyTax replied 7 months ago.

Yes, it is. There is only one rate of corporation tax, hence companies having no liability on dividends. The paying company will have paid corporation tax at 20% on its profits and the dividend was paid out of post-tax profits. The first link I gave you was from May 2016. The changes to how dividends will be taxed on individuals from 2016/17 were announced over a year ago in the July Budget. There has been no mention since of any implications for companies. It would have been a bigger story if there were.

Customer: replied 7 months ago.
Thank you ... finally do i report the franked income as the nett amount received or grossed up by the 20%
Expert:  TonyTax replied 7 months ago.

Net.

Customer: replied 7 months ago.
Where in CT 600 do i claim the 20% imputed tax
Expert:  TonyTax replied 7 months ago.

There is no imputed tax to claim. A company which pays a dividend pays it out of post corporation tax profits. The receiving company doesn't pay corporation tax on dividends received. Therefore, you cannot claim relief for corporation tax by another company. The 10% tax credit on dividends paid to individual shareholders prior to 6 April 2016 was "notional". It wasn't repayable under any circumstances as, in effect, it didn't exist. It was treated as settling the individual shareholder's liability to tax at the basic rate.

Customer: replied 7 months ago.
do i need to deduct the share dividend income from the company P&L in the CT600?
Expert:  TonyTax replied 7 months ago.

Yes.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15886
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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