Can the administrator delete this post? I've no idea how the original post ended up in this forum. I've re-wrote the post in the correct forum but there is no way of deleting the post here.
-- Edited by Peasie on Monday 9th of May 2011 05:18:22 PM
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Never buy black socks from a normal shop. They shaft you every time.
Think this one deserved it's own tread as may get interesting when Bill finds!
It's common practice to take dividends during the period but if the company is loss making as would be indicated here then it shouldn't be paying dividends.
However, such is a bit late when an interim dividend has already been paid.
A dividend is a dividend regardless as to whether it's a one man company or a multinational paying out to thousands or shareholders. As such once a dividend has been paid then it cannot just be taken back again.
At the time that the dividend was paid in the example the entity was in profit with no reason to suspect that such would not be the case at the period end.
Just to note here. I'm only talking about dividends on ordinary shares not preference shares which are quite differnet and in certain circumstances payment of dividends for preference shares could legitimately result in an entity going overdrawn.
There's an interesting current discussion around this point over on accounting web. Espechially in relation as to whether once a dividend has been issued can HMRC enforce it's override and reversal.
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Dividend is meant to be a financial rewards paid to shareholders of a company after a financial period's proft(usually at least one financial year) has been worked out after tax.
Big or most companies only pay out a part of the profit as dividend and plough back in the rest into the company to increase working capital.
So I really dont see why dividend should be calculated under a 6 months period calender, tax charged thereafter, and company accounts drafted afterwards.
It could be worked out on paper of course, but as a matter of accounting principle and best practice, i doubt.
