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AIA affecting distributable profits

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Is there a straight forward answer to this?

So a Ltd has been operating for 1 year. Profit on P&L is £36k. A Van was purchased for £8k. This £8k will be classed as AIA (not currently included in the figures). So corp tax will be payable on 36k-8k= £28k. 19% corp tax = £5320.

In order to use Dividends to offset Director's Loan Account currently £18k dr. Is there £36k distriutable? Am I correct in understanding that AIA does not affect the distributable profits? (I know there will be some depreciation to consider in the P&L too)

I am not a qualified accountant yet and this is purely for help in understanding. 

Thanks

Replies (8)

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Danny Kent
By Viciuno
18th Jan 2022 22:37

You will have deferred tax as well which will reduce the distributable reserves.

Max dividends will be £36k - £5.32k - deferred tax.

Your correct that AIA does not directly affect the retained earnings, but it will indirectly effect it via the deferred tax adjustment

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Replying to Viciuno:
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By Wanderer
19th Jan 2022 00:49

Viciuno wrote:

Max dividends will be £36k - £5.32k - deferred tax.


More likely
£36k - £5.32k - depreciation
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Replying to Wanderer:
Danny Kent
By Viciuno
19th Jan 2022 10:34

True, however OP said they were aware of depreciation, they are not looking for an A-Z of things that effect the final figure. I understood the question to be broadly "how does AIA effect distributable reserves".

I assumed (possibly incorrectly) that as a trainee it's likely that they will be exposed to accounts other than those prepared un FRS105 although your right I should have said that DT isn't always calculated.

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By Paul Crowley
19th Jan 2022 00:12

Micro company?
FRS 105?
If yes yes then deferred tax does not apply

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By johngroganjga
19th Jan 2022 08:13

Your distributable profits will be whatever your accounts say they are when you have finished them, after taking everything into account. If £36k is currently the profit after tax but before providing for any deferred tax your distributable profit will be that figure minus whatever deferred tax you need to provide for - but see Paul’s point about maybe not having to provide for any.

The profit on which the company will pay tax will not however be £36k -£8k. It will be £36k plus the current tax charge plus depreciation and any other disallowable expenses less capital allowances, including AIA on the new van.

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Replying to johngroganjga:
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By Bobbo
19th Jan 2022 11:00

Where in the accounts does it specify how much the distributable profits are? :)

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Replying to Bobbo:
By johngroganjga
19th Jan 2022 12:10

In most cases it is the retained profits figure in the balance sheet below issued share capital. In complex cases, such as where there are investment properties that have been revalued, it is not as simple as that.

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RLI
By lionofludesch
19th Jan 2022 13:31

"Am I correct in understanding that AIA does not affect the distributable profits? "

You are - but depreciation does affect them.

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