Press Releases
15 February 2010
Companies rush to pay shareholders dividends ahead of 50% tax rate
• Pressure on other UK listed companies to follow suit
Companies have started to rush to pay their shareholders special dividends before income tax rates for higher earners jump on April 6,* according to Wilkins Kennedy, the Top 25 accountancy firm.
Wilkins Kennedy explains that both public and unlisted companies could provide their shareholders huge tax savings by distributing income early.
Matthew Hall, Head of Tax for Wilkins Kennedy, explains: “This is a simple straightforward and legitimate tactic with which, if done correctly, HMRC could have no issue.”
“The company has to ensure it has accumulated the profits needed to cover the dividend and that the special dividend is correctly approved and documented.”
“We have seen a dramatic spike of companies wanting to execute these special dividends in recent weeks – that is not too surprising as this is the biggest jump in income tax in over 30 years for higher rate taxpayers!”
Listed UK companies such as Hargreaves Lansdown, the leading financial advisory company, and Rathbone Brothers have announced they are to pay special dividends ahead of the April 6 deadline and other companies such as Moneysupermarket.Com have brought forward their dividend payment date from April to March.
Matthew Hall, Head of Tax for Wilkins Kennedy, explains: “More and more companies are receiving requests from their shareholders to make one-off early payments of dividends.”
“Paying dividends now is a sure way to keep investors happy. Those shareholders who do receive an early pay out could find themselves saving thousands of pounds in tax.”
“This is important not only for listed companies but also those that are privately owned.”
Wilkins Kennedy says that companies can borrow to fund an early dividend.
Matthew Hall comments: “A number of businesses could find that their current cash flow position does not enable them to make early payments, although their profits easily justify it.”
“The problem is, however, that many banks are reluctant to advance any more money at present so shareholders in these companies could miss out on these valuable early payments. However, private companies, if they plan and execute the move carefully, can benefit from the lower rates whilst not paying the dividend until the funds become available.”
*As a result of the increase in the top rate of income tax to 50% those paying the highest rate will see their rate of tax on dividends increase from 32.5% to 42.5%.
ENDS
Press enquiries:
Matthew Hall
Head of Tax
Wilkins Kennedy
Tel: 01784 435561
Nick Mattison or Gordon Carver
Mattison Public Relations
Tel: 020 7645 3636
