Category: HMRC

Dividends

In the hands of an investor (unit holder) within the charge to IT, dividend distributions are treated in the same manner as any other UK company dividend.¹

Equalisation is returned capital sum. As it is a capital receipt, it should be deducted from the unit holder’s cost of the units for CGT purposes. ²

It should not be treated as a capital distribution. It is a return of the initial price paid and it should therefore be deducted from the price paid when computing the chargeable gain on the eventual disposal. ³

Calculation for tax return

Dividend

Tax payer usually receives a Tax Certificate from his Broker showing both dividends paid and equalisation figure. Dividend figure included equalisation, so we need to deduct equalisation figure to get to the Dividend figure that needs to be reported in the tax return.

Capital Gain

Equalisation should not be treated as a capital distribution. It is a return of the initial price paid and it should therefore be deducted from the price paid when computing the chargeable gain on the eventual disposal. ³

Tax Return

UK Company Dividends are put in Box 4 and AIF distributions Box 5 of SA100 TR3.

Notes:

1. IFM03350
2. see IFM02230 for an example
3. CG57705

Step 1: Login into your Personal tax account; using link

https://www.gov.uk/personal-tax-account

Step 2: Click `National Insurance and State Pension`

Step 3: Check out both links below:
               State Pension Summary
               National Insurance record

Step 4 : Check all years to show `Full year`.

RA Articles

Employment Allowance with changes mid year. – Roy Accountants

Employment Allowance: Group / Connected Companies – Roy Accountants

ICAEW Articles

How to make the employment allowance work for you | ICAEW

Single-director companies and the employment allowance | ICAEW

Registering a company as an employer where Directors are from overseas and do not have a National Insurance number.

We need to call HMRC on 0300 200 3200.

Before calling gather following information:

Email of Employer helpline : employer.helpline@notifications.hmrc.gov.uk

Notes:

1. Remember to take down details of the HMRC officer with whom you spoke ; refer to :^{https://www.icaew.com/technical/tax/working-with-hmrc/hmrc-contacts#}
   
2. HMRC does not register employers at virtual office addresses so please ensure to have physical trading address on hand before calling HMRC.
   
3. For an employee who is not in UK and has never been UK tax resident use NT tax code and NIC letter X. See HMRC CWG2 point 4.6.7

When assets become of negligible value in TP’s (taxpayer) ownership, TP may choose to make a negligible value claim. TP is treated as though he had disposed of the asset and immediately reacquired it at the time the claim is made, for an amount equal to the value which is specified in the claim. 

This is most commonly applied to shares where the company goes into liquidation.¹

Claim should be made via a tax return. Date of claim is date of submission of tax return.

Conditions for making a claim are:

• you must still own the asset when you make the claim²
• the asset must have become of negligible value while you owned it.

Set capital loss against income

Usually, capital losses are not allowed to be set-off against income, as capital gains are taxed at a lower rate than income tax.

But if certain conditions³ are met NVC loss can be set off against income.

Limit on losses

For losses made in 2013 to 2014 onwards, the total of all Income Tax losses which can be claimed against a year’s income is limited to £50,000, or 25% of that income if greater.

This limit does not apply to losses on shares to which EIS or SEIS relief is attributable. Helpsheet 204 Limit on Income Tax reliefs (2022) explains which reliefs are included in the limit.

Tax return

1. Provide details of negligible value claim in box 54, ‘Any other information’⁴, on SA108 pages and attach computations with your tax return.

2. Ensure loss is included in boxes 7, 19, 27 or 35 of the SA 108, as applicable, and use code ‘NVC’ in boxes 8, 20, 28 or 36, as applicable, and provide an accompanying computation.

3. To set-off capital loss against income complete Box 41 on SA108.

4. Complete box 42 for losses in shares of EIS or SEIS.

Sample Computation ^{5 and 6}

Deemed disposal proceeds                                                                      £Nil

Allowable costs:

Actual Purchase cost                     £15,000

Less:

Income Tax relief re SEIS               £1,000⁷                                      £14,000              

Allowable Loss  eligible to be set-off against income                      £14,000

Notes:

1. Tolley Exam Training 30.4
2. See Example 1 in HS286.
3. See HS286 for these conditions.
4. Information to include in this box is given in ` How and when to claim the relief` section of HS286.
5. See Example 4 in HS286.
6. Good computation examples given in Tolley Tax computations 227.2 and 15.5
7. Assumed less than 50% relief claimed in the year of investment due to insufficient taxable income.