My predicament is whether to allow backdating of dividends to the previous YOA or not. That year is being finalised and the accountant (I am not one) wants to declare a dividend to clear the member's debit loan. Since my post grad course in taxation I hav
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
Backdating a decision really involves putting an earlier date to the declaration than the actual one. It in principle, is not a tax related question, but a legal one. There probably is a difference between backdating the transaction, and recoding a date in the past, which is the date the parties agreed on the transaction. In other words, the minutes, which is done later, merely records what was agreed on earlier.
Section 46(1), of the Companies Act, is also relevant here. And very important, section 45 of the same Act.
The problem here is that the date of declaring the dividend is irrelevant as far as the dividends tax is concerned.
If the interest payable on the loan (or debt) is less than the market-related interest in respect of that debt, the company is, for the purposes of the dividends tax, deemed to have paid a dividend (if that debt arises by virtue of any share held in that company by a connected person) - section 64E(4).
For the purposes of the Dividends Tax, a dividend is, to the extent that the dividend does not consist of a distribution of an asset in specie and is declared by a company that is not a listed company, deemed to be paid on the earlier of the date on which the dividend is paid or becomes due and payable.
The date paid or when the dividend became payable, is therefore the relevant date – not the date it was declared.