A dividend is a payment a company can make to its shareholders if it has made enough profit. This guidance note is a practical guide to dividends and takes the reader through what a dividend is, the procedure for recommending, declaring and paying dividends, the paperwork involved (including dividend vouchers) and how a shareholder can waive their entitlement to a dividend.
A company must not pay out more in dividends than it has available in profits from current and previous financial years. There are strict rules that companies have to adhere to in the process of recommending, declaring and distributing dividends and the paperwork that must be kept. This guidance note therefore looks at final and interim dividends, the board meeting(s) required to recommend and declare a dividend, whether shareholder consent is required and how dividend vouchers work as well as looking at why shareholders may want to waive their right to a dividend.
Whilst this guidance focuses on the payment of cash dividends, there is also a short discussion of dividends in specie (dividends in kind). This is to complement our ordinary resolution and board minutes relating to the declaration of a dividend in specie. This is however a specialist area and independent legal and tax advice may be required.
This guidance note also discusses the replacement of the dividend tax credit by a tax free dividend allowance as of April 2016 and reflects the change in the amount of the tax free allowance for tax years 2018/2019 onwards.
Note that this guidance note does not consider the general tax and accounting rules that apply to dividends. Further information can be found on HMRC's website . It may also be necessary to seek independent tax and accounting advice.
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