Decision time on dividend taxation (From The Wiltshire Gazette and Herald)

Decision time on dividend taxation

SMALL companies paying dividends to individual shareholders from the beginning of April will be subject to a minimum rate of corporation tax of 19 per cent, the Inland Revenue has confirmed.

The announcement left companies with two choices, say accountants Baker Tilley.

"If companies chose to pay the dividend before April 1, they will have avoided paying the 19 per cent corporation tax, but shareholders will pay any higher rate income tax in their dividend by January 31 2005," said tax partner Dianne Simpson-Price.

"The alternative was to pay the dividend on or after April 6, in which case companies will be hit by the 19 per cent corporation tax, but shareholders will have longer to pay any higher rate income tax on the dividends.

"Small companies with taxable profits of less than £50,000 a year must weigh up which is the best option for them."