Company losses and dividends

Company losses and dividends

Didn't find your answer?

Company has a £17k loss in 2008.
If we carry back the loss under s393 to 2007 (Profit of £41k in 2007 all taken by dividend) does this effect the available profits for dividend distribution for 2007? i.e. will we have to go back and change the dividend and inrease the DCA so it is overdrawn and then suffer the income tax consequences. Or do the dividends already voted in 2007 stand?

We rarely do any of this type of work so are a little puzzled as to the outcome! Any advice welcome.
tax anon

Replies (2)

Please login or register to join the discussion.

avatar
By AnonymousUser
06th Jun 2008 10:08

You need to...
...distinguish accounting profits and losses from tax profits and losses.

Even if they both happen to be the same numerically, they need to be considered separately.

The tax loss for 2008 may be carried back and set against the tax profit for 2007 but this has no effect on the accounting profit for 2007, which remains unaltered so that the dividend paid out of that profit is also unaffected.

The accounting loss for 2008 gets carried forward for write-off against future years' accounting profit (unless there are other reserves it could be written off against).

Thanks (0)
avatar
By AnonymousUser
06th Jun 2008 10:04

No
You are confusing accounting profits with taxable profits.

The dividends were based on accounting profits and so are fine as long as they have been properly documented.

Carrying back the loss is a tax entry and does not affect the accounts as filed with companies house.

HTH

Thanks (0)