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Drawings vs Dividends

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA TX-UK Exams › Drawings vs Dividends

  • This topic has 1 reply, 2 voices, and was last updated 2 years ago by Tax Tutor.
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  • June 23, 2022 at 12:46 pm #659212
    rehantemuslim
    Member
    • Topics: 1
    • Replies: 0
    • ☆

    If an owner of small private limited company draws funds from the business as drawings, will it be taxed at dividends rates or non-savings income rates?

    As its technically not a dividend because the money being drawn is not from accumulated profits/ retained earnings.

    June 26, 2022 at 1:19 pm #659338
    Tax Tutor
    Member
    • Topics: 2
    • Replies: 3965
    • ☆☆☆☆☆

    An unincorporated trader extracts funds from the business as drawings but is taxed upon the adjusted trading profit of the business not on those drawings.

    An owner manager of a company is taxed on the funds extracted from the company which may be in the form of a salary or a dividend – drawings do not exist for owners of companies!

    Refer to Chapter 26 on Tax Planning Style Questions – Section 3

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