Taxation / entitlement to dividends

by **dally** on Wed Jan 11, 2012 1:38 pm

Assume there was a life-interest settlement and the sole life-tenant died on 31 December 2012, with the trust fund then passing abolutely to A N Other. If a dividend is received on say 7 January 2012 with a record date is 23 December 2011. How is that dividend dealt with as income of the trustees or onf A N Other? Is it taxed in the same way? (Dividends ae normally taxed as receivable but the entitlement to a dividend is based on the record date).

Thanks in advance.

by **Lee Young** on Wed Jan 11, 2012 1:42 pm

It depends whether or not the apportionment rules apply. If they do then the payment must be apportioned; if not then this is income after the date of the life tenant's death and passes to A N Other.

by **Lee Young** on Wed Jan 11, 2012 1:43 pm

Actually what I have said is wrong. If by record date you mean date of payment, then it would belong to the life tenant, as this date is befoer the date of death.

by **dally** on Wed Jan 11, 2012 1:57 pm

I am assuming apportionment does not apply.

By record date I do not mean date of payment but the cut off date in the declaring company's register whereby dividends are payable to registered shareholders at that date.

by **Lee Young** on Wed Jan 11, 2012 2:26 pm

The payment date is important, where no apportionment applies. Therefore if your assumption is correct, and the official payment date is after the death of the life tenant then the dividend belongs to the remainderman.

by **maths** on Wed Jan 11, 2012 3:07 pm

If the dividend is a final (not interim) dividend it is due and payable when the directors' resolution is passed or on a future date if the date is specified in the resolution.

Income tax is due on the part of the person entitled at the relevant date irrespective of actual date of payment.

The record date and the "ex-dividned" date are to deal with the practical mechanics of dividend payments but do not, I believe, later the above.

Accordingly I would suggest that the date is identified when the dividend was due and payable (ie debt created); if prior to the life tenant's death it belongs to him; if the date is after death then it is the remainderman's.

by **dally** on Wed Jan 11, 2012 4:59 pm

Thanks guys. As the amounts in question are small and the the company's US listed corporations I am going to take the practical view that the dividends are due to the remaindermen and taxable on them on the basis of post-death payment dates (as the companies in question have regular quarterly dividend dates).