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Previously on "Dividends from retained profits after loan"
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I think that the OP is mightily confused, and only wants to hear what he wants to hear?
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Originally posted by richy View PostYes! It's good expenses come off, and save me paying corporation tax.
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I'm not sure that you are clear about this? NLUK standard answer applies.
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Originally posted by Scruff View PostCapitalise the loss, and then amortise it as an expense as the business generates profit. Matching principle
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Capitalise the loss, and then amortise it as an expense as the business generates profit. Matching principle
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Thank you @TheCyclingProgrammer
yes, my retained profits are gone... at least can carry forward the loss on that expenditure.
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As Maslin said, the loan isn’t really what’s important. The capital element of a loan just affects your cash flow. It sits on the balance sheet as a liability.
It’s the actual expenditure that affects your profit and loss. Of expenditure means you’re making a net loss for the year then this will reduce any retained profits from previous years.
Only once there is a sufficient balance in the company reserves will you be able to take dividends again.
The loan itself can be repaid whenever the business has the money to do so.
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Originally posted by Maslins View PostThe director (or bank) loan is basically irrelevant, it's the income vs expenditure that's key (a loan isn't income...no EBT comments plz!).
You can have debts and pay dividends, as long as you have assets in excess of the debts. Inevitably each listed company will be different to the next, so can't really lump them all in one basket.
You may be interested to read the BHS/Philip Green stuff with this in mind. Some would argue he did some clever/dodgy accounting, understating debts, to make it look like there was profits. He then declared a big dividend, and later on...oops, actually the company was in a much worse state than we thought.
Thank you @Maslins
Ok I understand better now.
So the loan was used on expenses, which then mean a loss this year.
In a future year when the loss carried forward has been passed (at that point I'll repay the loan) and then be able to declare dividends from profits again.
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Originally posted by richy View PostSo any company which takes any kind of directors loan cash, or even a loan from a bank, cannot declare any dividends until after first profitable year?
Originally posted by richy View PostAlthough, I don't understand how stock market companies (which presumably have large debt) can declare dividends -- perhaps those are a different category of share.
You may be interested to read the BHS/Philip Green stuff with this in mind. Some would argue he did some clever/dodgy accounting, understating debts, to make it look like there was profits. He then declared a big dividend, and later on...oops, actually the company was in a much worse state than we thought.
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