Would like an opinion this - thought I knew the rules until recently!
Just took on a client from another accountant.
They have applied a dividend waiver as follows:
2 shareholders each have 1 share. Dividend Declared - £200k. Shareholder 1 receives his 50% share so £100k.
Shareholder 2 (and this is the bit that gets me) PARTIALLY waives his entitlement to the dividend, so only receives £50k.
It get worse.....He then GIFTS his other £50k to shareholder 1 and this is taxed on shareholder 1 as a dividend!
So to summarise, a dividend waiver goes in, shareholder 1 receives (and is taxed on) £150k and shareholder two receives (and is taxed on) £50k. All this from a 50:50 shareholding!
This seems like utter nonsense to me! To me a dividend is paid out to shareholders on the basis of their shareholding. If a dividend waiver is put in place, the shareholder waives his entitlement to that dividend and the reserves remain in the company. So thats the first fault - partial wavers, as far as i'm concerned, don't exist! Secondly, he can gift the dividend if he wants, but it is still taxable on the shareholder who is due to receive the dividend, not the beneficiary of the gift!
Can someone confirm i've not lost the plot or tell me i'm not up to speed with these things!