We are working with a firm of Solicitors who are advising our client on a Share Premium account reduction in order to create distributable reserves. In effect, a £100,000 share premium account is to be written down under new CA rules and credited directly to reserves. The client will then declare a pre year end dividend using those reserves.
My questions are:
1. Are there any general observations or warnings to be considered.
2. Is this tax neutral, ie. no effect for tax as direct to reserves.
3. What is the accounting entry / disclosure and is there any online guidance. I'm led to believe that the journal is simply debit share premium and credit direct to balance sheet reserves.
All help, guidance very much appreciated.