Kevin Read looks at a tax planning strategy recently upheld in an Upper Tribunal case.
Let me take you back to March 2016, which seems like a lifetime ago in political and economic terms. George Osborne announced that the dividend tax credit system was being abolished from 6 April 2016. This change was also going to put up effective dividend tax rates by about 7.5 percentage points; for an additional rate taxpayer, it was rising from 30.56% to 38.1%.
This is the backdrop to a recent Upper Tribunal (UT) case, in which two brothers managed to save a large amount of tax by careful planning of when they received dividend payments. With only one class of share in issue (which they owned equally), there was no opportunity to pay different levels of dividend to each shareholder. Their strategy relied on the fact that an interim dividend is ‘paid’ for income tax purposes when it is received by the shareholder; in contrast, a
