Coronavirus - Impact to Directors of Limited Companies

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Q. I am the director of a limited company and due to the impact of the coronavirus, I will need to waive my entitlement to company dividends for the time-being. Are any formal waiver procedures necessary?

A. A 'waiver of remuneration' happens when a director or employee gives up rights to remuneration and gets nothing in return.

If an employee and employer agree to a reduction in the employee's remuneration before they are paid, for example to support company cashflow during the pandemic, then no income tax or National Insurance contributions (NICs) will be due on the amount given up. This is provided the agreement is not part of any wider arrangement to divert the amount to a particular recipient or a cause. For example, if it was waived on condition that the sum would be donated to a particular charity, this would still be liable to tax.

Directors or other shareholders, including employees, are able to waive their right to be paid a dividend. For this to be effective, a Deed of Waiver must be formally executed, dated and signed by shareholders and witnessed and returned to the company.

The waiver must be in place before the right to receive a dividend arises. For final dividends, this is before they are formally declared and approved by the shareholders. For interim dividends, the waiver must be in place before the dividends are paid.

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Added By: Sharon Worger on 05th Jun 2020 - 10:45
Last Updated: 05th Jun 2020 - 10:56

Number of Views: 46
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