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 prior to the dividend being declared.

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 ‘commercial’

The first two points relate to ensuring that the dividend waiver is effective for the purpose intended. That is, if the waiver is not effected by deed or done retrospectively, the shareholder will still be entitled to the dividend when it is paid. The shareholder will likely have under-declared dividend income on their