Dividend waivers

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance

Dividend waivers

Produced by a Tolley Owner-Managed Businesses expert
Owner-Managed Businesses
Guidance
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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

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