Dividend Payments

[kans75]

Hi All,
Can interim dividends be declared even though there is no sufficient income for a specific period.
For eg. I started my business with an initial capital from another source and subsequently increased my business income in 1st quarter and got paid myself some reasonable dividend.
In the 2nd qtr, there was some income but not that much as compared to 1st qtr as the business conditions were different.
My dividend in qtr 2 were not equal to business income but a bit over as i had some surplus carried over from 1st qtr.

My query is, can the initial source of funds(loan) be counted towards declaring one's dividend or is only the actual earnings from the business?

Thanks for all your help.

Regards
K

[HSK Accountancy Services]

Hi All,
Can interim dividends be declared even though there is no sufficient income for a specific period.
For eg. I started my business with an initial capital from another source and subsequently increased my business income in 1st quarter and got paid myself some reasonable dividend.
In the 2nd qtr, there was some income but not that much as compared to 1st qtr as the business conditions were different.
My dividend in qtr 2 were not equal to business income but a bit over as i had some surplus carried over from 1st qtr.

My query is, can the initial source of funds(loan) be counted towards declaring one's dividend or is only the actual earnings from the business?

Thanks for all your help.

Regards
K

No. Dividend should only be paid from distributable reserves of a company. If your company have accumulated reserves in the past then you can use that to pay dividend.

Without full details cant give the detailed answer but the above apply to generic terms. Also note that HMRC may be OK for that situation but HO may not (as they look for past 12 month income).

I hope that helps.

[kans75]

Hi HSK
Thanks for your reply. I understand that dividends are paid from the reserves. I got new client where earnings are expected to increase in this quarter.

I declared interim dividend which was a bit more than the actual income for qtr 2, although there were enough funds in the company.(ie.,including the initial working capital, i had contributed from my personal a/c for my Ltd. co.).

In qtr 2 period only ,I overlooked my dividends by mistake but overall for the year the company earnings looks positive.

I think my earnings should be enough without the need for any dividends for qtr 3.
My query is :

1.Can HO still refuse the dividends earning stating that reason or do they look the overall financial status of the company for the full period(10mths) ignoring interim dividend declaration situations?

2. Is there any way for me revert back my dividends if its done by mistake?


Hope I explained my situation and all suggestion will be of immense help.

Advance thanks.

Regards
K