Dividends to incur PAYE and NIC levies

News Article - 26 January 2007
Category:

Company owners and managers are to incur levies on PAYE tax and national insurance contributions (NIC) on dividends, it has been revealed.

Mervyn MacDonald, head of tax at specialist advisor DTE, informed Accountancy magazine of the move, which is to be carried out by HM Revenue & Customs (HMRC) using the employment securities legislation.

"This is one step further down the slippery slope that may ultimately lead to all withdrawals from companies being subject to PAYE and NIC," he said.

According to the publication, those in charge of companies often use dividends to release cash from their businesses.

Mr MacDonald added that such payments were beneficial because they did not incur NIC, however following HMRC's 2006 publication of guidance for inspectors, the situation could change.

Ministers now desire that that the "employment reward" - described as the passing of value to an employee in return for their labour - is taxed, as part of what Mr MacDonald predicts will be a broader attack on companies' shareholding directors.

Payments will be sourced where HMRC believes that companies are using cash bonuses as dividends and low-value shares are given to employers who are entitled to a small amount through pay which is topped-up through dividends, reports Byestart.

Article keywords:

---

More industry news

• Think tank warns UK may have already slipped back into recession
• Growing demand for HR staff in technology and international sectors
• Boosting business growth a ‘priority’ to avoid Eurozone slowdown
• HMRC launches alternative disputes pilot scheme this week
• December employment statistics disregard gloomy recruitment predictions
• Eurozone manufacturing PMI shows modest improvement
• UK scores highly for economic governance by ratings agency
• Government launches two-year project focusing on manufacturing sector
• Burden of regulation on UK businesses ‘too high’

Back to news home page »