Every month we go through our CeMAP forums at http://www.cemap123.co.uk (which our students have access to as part of their CeMAP Training programme) to see what interesting queries have been posted.

Here is this months CeMAP query from Daniel A:

Question:

I’m baffled by how  share dividends work. For instance:
Will has received a cheque for £300 in respect of share dividends.

What was the gross amount upon which this payment was based?

Why is the answer £333.33?

Answer:

This about ‘grossing up’. A dividend is always paid net of 10% tax. As £300 was received (net), then we need to gross it up i.e. divide by 0.9. 300/0.9 = 333.33, hence 100%.

Hope this clarifies it. Any other problems, don’t hesitate to ask

David A – Futuretrend CeMAP Trainer