Non corp distros


K

Kevin

Quick summary for company with 31/3 year ends.
03/04 PCTCT £9k, divis £4k, retained Profit £5k. 0% CT tax paid.
04/05 PCTCT £19k, Divis £9k, retained Profit £10k

I've gone through the NCDR pdf on the HMRC site but this still isn't clear.

According to the site the tax for 04/05 is, £9K at 19%, £10K taxed at 11.25%
(approx underlying rate)

These are the issues that I see.
1) Retained profit from 03/04 now has no tax breaks, if it's distributed,
it'll be taxed. My tough luck I suppose!
2) If in 05/06 we assume, PCTCT is £10k, and Divis is £20k, then it seems
that while the company is distributing a dividend from reserves, the tax law
carries that excess NC distro forwards to be taxed in the next financial
year.

What concerns me is that of the £20K 05/06 divis, £10K has already been
taxed in 04/05 at 11.25%. When I carry that excess NC distro into 06/07
it'll be taxed again at 19%

Have I missed something here?
 
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P

Paul Garbett

Kevin said:
Quick summary for company with 31/3 year ends.
03/04 PCTCT £9k, divis £4k, retained Profit £5k. 0% CT tax paid.
04/05 PCTCT £19k, Divis £9k, retained Profit £10k

I've gone through the NCDR pdf on the HMRC site but this still isn't
clear.

According to the site the tax for 04/05 is, £9K at 19%, £10K taxed at
11.25%
(approx underlying rate)

These are the issues that I see.
1) Retained profit from 03/04 now has no tax breaks, if it's distributed,
it'll be taxed. My tough luck I suppose!
2) If in 05/06 we assume, PCTCT is £10k, and Divis is £20k, then it seems
that while the company is distributing a dividend from reserves, the tax
law
carries that excess NC distro forwards to be taxed in the next financial
year.

What concerns me is that of the £20K 05/06 divis, £10K has already been
taxed in 04/05 at 11.25%. When I carry that excess NC distro into 06/07
it'll be taxed again at 19%

Have I missed something here?
Putting your 04/05 scenario into our software (which is normally right) I
get £19k taxed at 19% = £3,610 less marginal relief £1,472.50 = £2,137.50
(which equates to 11.25% on £19k as you say).

I then get a 7.75% uplift on £9k = £697.50.

Total CT £2,835

So, same as you say.

To answer your points:

1. Correct

2. In principle yes if the NCD regime continued. In practice no, as NCD is
abolished from 1.4.06 onwards (subject I guess to parliamentary approval).
 

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