Hello
Q. Is it allowed to declare and pay a dividend if the company has made a loss in that same year?
To be clear, that's a loss, and NOT that the company is, was ever, or expects to be, unable to cover its debts. I've asked my accountant for clarification and am currently awaiting their response.
Say, company starts the year with stated "Shareholder funds" of £Nk from previous year.
At year start, company pays a dividend of well less than £Nk, credited to DLA.
At year end, salary and pension are paid as annual lump sums.
Turnover for the year is about half of what it was the previous year. Overall the company makes a loss, essentially total expenses exceeding total revenue... the main expenses being salary + pension of course... it not being a total wipe out though, the company is still solvent.
The CT loss will be cast back to the previous year and should give rise to a CT refund in due course.
It has been suggested that the dividend is disallowed due to the booked loss. With the dividend cancelled, the loss remains the same but the stated shareholder funds would now stand at 2x the dividend amount, i.e. it's still more than twice covered. It is this point which I am seeking clarification on!
Can HMRC refuse the CT refund? Presumably, yes, but on what grounds and might this have relevance for the ability to pay a dividend?
Q. Is it allowed to declare and pay a dividend if the company has made a loss in that same year?
To be clear, that's a loss, and NOT that the company is, was ever, or expects to be, unable to cover its debts. I've asked my accountant for clarification and am currently awaiting their response.
Say, company starts the year with stated "Shareholder funds" of £Nk from previous year.
At year start, company pays a dividend of well less than £Nk, credited to DLA.
At year end, salary and pension are paid as annual lump sums.
Turnover for the year is about half of what it was the previous year. Overall the company makes a loss, essentially total expenses exceeding total revenue... the main expenses being salary + pension of course... it not being a total wipe out though, the company is still solvent.
The CT loss will be cast back to the previous year and should give rise to a CT refund in due course.
It has been suggested that the dividend is disallowed due to the booked loss. With the dividend cancelled, the loss remains the same but the stated shareholder funds would now stand at 2x the dividend amount, i.e. it's still more than twice covered. It is this point which I am seeking clarification on!
Can HMRC refuse the CT refund? Presumably, yes, but on what grounds and might this have relevance for the ability to pay a dividend?
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