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:
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?
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