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Where Taxpayers and Advisers Meet

Treatment of dividend from subsidiary

simplytax
Posts: 85
Joined: Wed Aug 06, 2008 3:34 pm

Treatment of dividend from subsidiary

Postby simplytax » Thu Dec 21, 2017 7:01 pm

If following an acquistion a parent company receives a dividend from the subsidiary out of its pre-acquisition reserves which is accounted for as a reduction of cost of investment in the parent's accounts, how should this be shown in the tax return and computations of the parent? Is it just ignored as there is no dividend income in the parent's P&L on basis dividend received was effectively a capital return of part of its cost of acquiring the subsidiary OR should it be shown as a dividend which is exempt under s931B CTA 2009. ie does it get shown in the CT600 as "Exempt ABGH distribution" or not regarded as income distribution if accounting treatment was to reduce the cost of investment?

bd6759
Posts: 3106
Joined: Sat Feb 01, 2014 3:26 pm

Re: Treatment of dividend from subsidiary

Postby bd6759 » Thu Dec 21, 2017 7:55 pm

A dividend is a dividend. It cannot be accounted for as anything else.

The purchase cost of the new subsiduary will have gone to the previous owners of the shares. The subsiduary will have had nothing to do with this transaction in its shares, therefore could not possibly be refunding any part of the purchase price.


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