[Ray Hampson]

A one man company makes a profit of £9000 after tax and declares a dividend of £10000, giving rise to a payment of £9000 after a tax credit of £1000. How is this treated in the company accounts? Are the reserves simply £9000 less £9000? Or does the tax credit somehow have an impact on the company's taxation payment to HMRC? In a 20% tax regime the profit before tax would be £11250 giving rise to taxation of £2250 i.e. profit £9000 after tax. Is £2250 remitted to HMRC or does the tax credit have some implication?

[rehmanvohra]

A company may pay dividends in excess of the current year's profit if and only, it has retained profits available.

I believe, in the UK, there is a corporation tax as well as tax on dividends. As far as the corporation tax is considered it will be £1,250. Tax on dividends will be deducted from payment to the shareholders and remitted to the HMRC. That tax is the personal taxation of the shareholder

[Ray Hampson]

I think you mean CT is £2250 can you confirm? When is the tax on dividend remitted to HMRC? Is it immediately due, or is it due with CT i.e. 9 months after year-end?

[rehmanvohra]

Yes it must be £2,250. Sorry for typo. I think Tax on dividends becomes payable when the dividends are paid. I am not sure about the period, but I will confirm it after a little bit of study. Tax is not my subject.

[rehmanvohra]

I am not quite good at tax. My subject s are financial and management accounting. However, I have found an article that might be of help.