Picking up the dividend pieces

Key Points:

Last year's changes to the rules for company dividends are back in the spotlight. The Government is considering both changing the rules and making it clear that dividends can be used for share capital reductions.

Companies may have to change – yet again – their procedures for determining and paying dividends.

A year after the centuries-old profits test was replaced by an assets test, the Government is looking at rewriting the rules again. One of the options under consideration is bringing back the profits test.

Treasury has raised this possibility in a new discussion paper which looks at:

• possible changes to the dividend test;
• can a dividend be used to reduce share capital?;