Double taxation of company dividends is reduced in the UK by a partial imputation system of corporation tax, which was introduced in 1973. Payments of advance corporation tax (ACT) charged on dividend distributions can normally be offset against the firm's corporation tax liability. However, for companies with surplus advance corporation tax, this ACT setoff is deferred and its value is reduced by discounting. Firms in a surplus ACT position face a higher tax cost of paying dividends than firms without surplus ACT.
Authors
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
Stephen Bond
![Michael Devereux](/sites/default/files/styles/square_desktop/public/2022-07/Michael_Devereux.jpg?itok=j8Yfozzo)
Research Associate University of Oxford and Oxford Centre for Business Taxation
Michael joined the IFS in 1982 and he has been a Research Fellow since 1990 and a Professor of Economics at the University of Oxford.
![Person graphic](/sites/default/files/styles/square_desktop/public/2022-06/IFS-person-graphic.png?itok=hWCtTSrz)
Lucy Chennells
Working Paper details
- DOI
- 10.1920/wp.ifs.1995.9511
- Publisher
- IFS
Suggested citation
S, Bond and L, Chennells and M, Devereux. (1995). Taxes and company dividends: a micro-econometric investigation exploiting cross-section variation. London: IFS. Available at: https://ifs.org.uk/publications/taxes-and-company-dividends-micro-econometric-investigation-exploiting-cross-section (accessed: 4 July 2024).
More from IFS
Understand this issue
![Jeremy Hunt](/sites/default/files/styles/square_desktop/public/2023-03/Jeremy-Hunt-F.jpg?itok=1YjT3_wn)
The Spring Budget explained
16 March 2023
![Image of the HM Treasury building](/sites/default/files/styles/square_desktop/public/2022-07/Treasury-building-featured.jpg?itok=spP7YoMZ)
Taxes could be cut within broader reforms
2 November 2023
![Number 10 Downing Street](/sites/default/files/styles/square_desktop/public/2023-03/number-10-Downing-Street-sign.jpg?itok=ih4CmLNU)
At last, we are back to a normal budget, but don’t expect many treats
13 March 2023
Policy analysis
![UK bank notes](/sites/default/files/styles/square_desktop/public/2023-08/UK-bank-notes_0.jpg?itok=AJxlVLQE)
Tax and public finances: the fundamentals
23 August 2023
![City](/sites/default/files/styles/square_desktop/public/2023-10/Image-of-city-2.jpg?itok=7EGTk9pG)
Full expensing and the corporation tax base
6 October 2023
![City](/sites/default/files/styles/square_desktop/public/2023-10/Image-of-city-2.jpg?itok=7EGTk9pG)
Long-term costs of full expensing much lower than official estimates suggest
6 October 2023
Academic research
![Journal cover image](/sites/default/files/styles/portrait/public/2023-04/Fiscal-Studies-Vol-44-1-Mar-2023.jpg?itok=8_tBgjFc)
Fiscal Studies, Volume 44, Issue 1
20 March 2023
![Journal cover image](/sites/default/files/styles/portrait/public/2023-04/Fiscal-Studies-Vol-44-1-Mar-2023.jpg?itok=8_tBgjFc)
Empirical evidence on the global minimum tax: What is a critical mass and how large is the substance-based income exclusion?
20 March 2023
![Working paper cover](/sites/default/files/styles/portrait/public/2023-01/CWP0223-Identifying-network-ties-from-panel-data-theory-and-an-application-to-tax-competition.jpg?itok=3taIDPCs)
Identifying network ties from panel data: theory and an application to tax competition
18 January 2023