Dividend warning released for higher earners

16/03/2010

Company owner/managers who are considering forwarding dividend payments to reduce the effect of the higher rate of income tax, have been warned to fill out the right paperwork by accountants.

Richard Mannion from Smith & Williamson accountants, warns that HMRC will be looking into any company that brings forward its dividend payments.

Many business owners are responding to the 50 per cent tax on higher earners from 6 April by undertaking tax planning. Some are considering bringing forward their dividend payments so they get taxed in the current tax year as opposed to 2010-2011, by which time the higher rate will be in place.

However, Mannion added, “HMRC will take a special interest in dividends paid towards the end of the tax year to check that they have been properly and legally paid. So, if anyone plans on bringing forward their payment date, they must prove that payment is made before April 5 2010 and that it relates to profits earned up to that period.”

In addition to this, business owners are also being reminded to prepare for the 1 April deadline for filing VAT returns online. So far only 14 per cent of firms have done so.