In certain circumstances shareholders may wish to pay dividends other than in proportion to their shareholdings. This aim is typically achieved by one or more shareholders not taking a dividend when it is declared. To effect this, the relevant shareholders must waive their right to dividends from the company. For a final dividend this must be done prior to the dividend being declared / approved as this creates an entitlement to the dividend or for an interim dividend it should be waived before it is paid / credited to the shareholder.

Care must be taken when waiving dividends. HMRC may attack this where there is a loss of tax as a result.

In order to minimise the risk of HMRC scrutiny when effecting a dividend waiver, the following measures should be taken:

1. •

   the waiver must be effected by a deed

2. •

   the deed must be executed before the dividend is declared or paid

3. •

   the waiver must be have an arm’s length commerciality

The first two points relate to ensuring that the dividend waiver is