ACT Budget decision is too slow for some: Hanson and Border among firms that fall into dividend timing trap

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The Independent Online
THE CHANCELLOR'S changes to advance corporation tax may have eased a headache for some of Britain's biggest companies, but Asda, Hanson and GEC are wishing he had been a bit quicker off the mark. They are among companies due to pay dividends to shareholders just days before the rate of ACT on them is cut from 25 to 22.5 per cent.

One of the first to be caught is Border Television, which will send its 1.3p dividend to shareholders - and a pounds 43,853 cheque to the Inland Revenue - on Friday. After 6 April, when the rate cut comes into effect, the ACT bill would have been pounds 5,659 less. A spokesman said there were no plans to delay payment.

Christopher Collins, a director of Hanson, the industrial conglomerate, was also philosophical about the pounds 6m extra tax on its 2.85p quarterly dividend, due to be paid on 1 April: 'It is not possible to change it as it has already been declared and the shares have gone ex-dividend.'

For most companies, the difference is simply in the timing of tax payments. The ACT paid can be offset against the mainstream corporation tax liability, so the less ACT paid now, the more mainstream tax will be due later. But for companies such as Hanson, where surplus ACT has been pushing its tax rate up, it delays the benefit of the Budget changes.

Companies that have declared dividends to be paid after 6 April will, however, enjoy an earnings boost this year as they will have to deduct less tax. BAT, which is due to pay its 22.6p final dividend in June, expects earnings to benefit by between pounds 45m and pounds 50m this year, and more than pounds 30m thereafter.

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