Companies pay dividends to shareholders as members of that company. Normally a company declares dividends annually at the Annual General Meeting (AGM). The dividend may be derived from both
Shareholders may receive interim dividend payments between AGMs
in anticipation of the final declaration. You should treat interim
dividends exactly as final dividends.
Dividends are derived from a shareholding and not employment. They cannot therefore be classed as earnings and do not attract NICs.
For dividends to be lawful they must meet two conditions:
The onus is on the employer to show that dividends meet the
conditions. However, even if the dividends do not meet these
conditions, this is a matter which can only be taken up by the
shareholders themselves under company law. There is no action open
to you under social security legislation. The fact that a dividend
has not met the requirements of company law does not make it
earnings for NICs purposes.
To decide whether a dividend is genuine rather than a disguised payment of earnings you need to see :
For further information on dividends see CT1520 and CT2007a.