A UK trading company receives a dividend of £20,000 from another UK company in which it holds a 5% shareholding. How is the dividend treated in the receiving company's corporation tax computation?
Answer and explanation
Correct answer: B. It is generally exempt
- Step 1: Most dividends from UK companies received by a UK company fall within an exemption.
- Step 2: They are excluded from the company's taxable profits.
Answer
It is generally exempt.
Why not the others: Dividends are not trading income and are generally exempt. There is no £50,000 threshold for the exemption. An income receipt cannot be deducted from the profits.
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