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01 March 2011
A limited company has two otherwise unconnected shareholders. One owns 70% of the shares, while the other owns 30%. They wish to draw unequal dividends, but not by way of dividend waiver
Jack owns 70% of the shares in X Ltd and Jill owns 30%. Apart from the ownership of shares in X Ltd the two individuals are not connected.
The shares are designated ‘A’ and ‘B’ shares respectively but they have equal rights in all respects and until now dividends have been paid at the same rate for both classes. The company is profitable and has substantial revenue reserves.
Currently Jack has a forecast gross income for the current tax year of £100 000. He does not want further income that will take him into the marginal rate of tax caused by the loss of the personal allowance.
Jill’s forecast gross income is £10 000 short of the level at which the 40% tax rate starts.
Not surprisingly she would like a further dividend to use the remainder of her basic rate band. A...
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