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Dividends after '19 - '20 loss?

Taking a dividend from a Ltd company. Is the loss from '19 - '20 carried forward?

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My Ltd Company made a £5,886 loss during the tax year '19-'20. During the tax year '20-'21 the company made a £5,614 profit. Can I take a dividend for the '20-'21 tax year or is the '19-'20 loss brought forward and therefore negates the '20-'21 profit?

Replies (22)

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RLI
By lionofludesch
26th Oct 2021 15:21

Depends.

What happened before 2019 ?

But, on the basis of only what you say, no.

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By Judith C
26th Oct 2021 16:02

Thank you lionofludesch. Here's a summary

'18-'19 £217 Loss after tax - No dividend
'17-'18 £2076 Profit after tax - Dividend £3950
'16-'17 £1585 Profit after tax - Dividend £0
'15-'16 £10,463 Profit after tax - Dividend £7000

Do you mean

1. "No", I can't take a dividend for the '20-'21 tax year or
2. "No", the '19-'20 loss is not brought forward and therefore does not negate the '20-'21 profit?

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Replying to Judith C:
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By Paul Crowley
26th Oct 2021 16:08

Dividends can only be taken from accumulated profits
Looking at years one by one does not achieve this
Look at last year's balance sheet
Does it show retained earnings or a loss?

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Replying to Paul Crowley:
RLI
By lionofludesch
26th Oct 2021 16:34

I agree with Paul.

Looking at that, you've two or three grand left in the kitty if that's the entirety of your trading.

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Replying to Judith C:
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By Bobbo
26th Oct 2021 16:11

the profit or loss in any given year is largely irrelevant.

what matters is the company's distributable retained earnings right now.

what does the balance sheet in the 2021 accounts show?

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Stepurhan
By stepurhan
26th Oct 2021 17:36

This is the sort of question you should be asking your own accountant.

If you cannot afford an accountant, and it sounds like your company isn't generating enough to pay one, then maybe you should not be operating through a company at all. By doing so you have taken on a whole bunch of extra complications that, on the basis of you having to ask this relatively simple question, you seem ill-equipped to deal with.

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Replying to stepurhan:
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By AdamMurphy
26th Oct 2021 19:19

Being able to set up and run a company is far too easy these days

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Replying to AdamMurphy:
RLI
By lionofludesch
26th Oct 2021 19:25

AdamMurphy wrote:

Being able to set up and run a company is far too easy these days

Definitely.

When I started, formation fees for a company were around £120-£150. Two to three weeks wages for an employed chartered accountant.

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By Leywood
26th Oct 2021 20:49

Limited co.
Tax year.
Oh dear.

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By Judith C
27th Oct 2021 11:24

Thank you Paul Crowley, lionofludesch and Bobbo. I understand now

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By CJS88
27th Oct 2021 11:40

I'm not sure you do understand. Is the company preparing accounts to 5 April every year?

If so then why?

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Replying to CJS88:
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By Southwestbeancounter
27th Oct 2021 14:24

Presumably 31 March year end but the OP doesn't say.

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Replying to Southwestbeancounter:
RLI
By lionofludesch
27th Oct 2021 14:58

Southwestbeancounter wrote:

Presumably 31 March year end but the OP doesn't say.

"19/20" could mean anything from Feb 19/Jan 20 to Dec 19/Nov 20 imho.

She doesn't say that it's a fiscal year. It could be the company's financial year. We don't know and I'm not convinced that it matters.

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Replying to CJS88:
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By Bobbo
27th Oct 2021 16:16

CJS88 wrote:

I'm not sure you do understand. Is the company preparing accounts to 5 April every year?

If so then why?

As it happens, my firm has a limited company preparing accounts to 5 April.

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Replying to Bobbo:
RLI
By lionofludesch
27th Oct 2021 16:27

Bobbo wrote:

CJS88 wrote:

I'm not sure you do understand. Is the company preparing accounts to 5 April every year?

If so then why?

As it happens, my firm has a limited company preparing accounts to 5 April.

It's a great ARD for CIS companies.

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Replying to lionofludesch:
ALISK
By atleastisoundknowledgable...
27th Oct 2021 17:51

lionofludesch wrote:

It's a great ARD for CIS companies.

Why?

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Replying to atleastisoundknowledgable...:
RLI
By lionofludesch
27th Oct 2021 18:07

atleastisoundknowledgable... wrote:

lionofludesch wrote:

It's a great ARD for CIS companies.

Why?

Because of the way CIS refunds work.

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Replying to Bobbo:
ALISK
By atleastisoundknowledgable...
27th Oct 2021 17:51

Snap. The director thought it had to be when he set it up and changed to that

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Replying to atleastisoundknowledgable...:
RLI
By lionofludesch
27th Oct 2021 18:09

atleastisoundknowledgable... wrote:

Snap. The director thought it had to be when he set it up and changed to that

Did you ask why he thought other options were available ?

If not, can you ask him now ? I'm curious.

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By MattS
27th Oct 2021 11:53

The easier way to think about it is that the total dividends you have taken to date cannot exceed the total post tax profits (less any losses) you have made to date

If you have exceeded this (my very very this quick maths shows that as at the end of 20/21 you have remaining profits to draw dividends against of £2685) then these dividends would be illegal and would have to be repaid.

A couple of other points to note;
- Are you operating from a company bank account or your own personal one?
- Have you offset the losses in the year against the prior year profit?
- What caused the loss in 19/20? Just wondering if something has been miss allocated
- Even if you dont need a dividend, you could still considering drawing one to maximise the tax free dividend allowance

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By Judith C
27th Oct 2021 17:47

Thanks MattS for your thorough explanation.

My company has been trading since 2007 so I've now done the calculation on the basis of total post tax profits against total dividends taken and I'm not able to draw a dividend for the '20-'21 year. Thank you for clarifying. I wanted to ensure I didn't do anything illegal.

In answer to your other points:
My company has been operating from a company bank account since formation
I've carried forward the trading loss
The 19/20 loss arose as I was unable to work for an extended period for personal reasons

In answer to other contributors my company has a 31 Mar year end and I have employed an accountant for 12 years who recently sold their business. Once I'm back in a position to do so I'll employ another one

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Replying to Judith C:
ALISK
By atleastisoundknowledgable...
27th Oct 2021 17:54

I think what MattS might have meant re offsetting losses against prior year profits was claiming carryback relief for Corporation Tax refunds.

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