Relevant profits

Background

This schedule handles details of relevant profits for multiple years where a dividend paid exceeds the profits available for distribution in the period for which it was declared, and ICTA 1988 s799 (3) and (4) require a calculation of relevant profits. The information flows up to the Analysis of distributable profits schedule automatically.

By completing the various data entry cells and sorting the columns, the software will take as much of the 'own profits' from each period on a LIFO basis as are required to satisfy the dividend paid. Dividends received may be entered on this schedule but they need to be backed out as this schedule only supports the 'own profits' and 'Tax paid' relating to the own profits. As the case B EUFT calculation is handled on the Analysis of distributable profits schedule supporting any dividend paid, details of any lower tier dividends must be entered using a further Analysis of distributable profits schedule developed from the original Analysis of distributable profits schedule.

It should be noted that when this schedule is developed from the Analysis of distributable profits schedule, the row that is ultimately supported on the Multiple foreign dividends schedule will display the distributed profits and tax actually relating to those profits rather than the pool of profits available to be distributed together with the tax thereon.

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Developing the schedule

This schedule can be developed from the Analysis of distributable profits schedule and provides a basis for calculating the Relevant Profits and relevant Tax Paid figures on the parent schedule.

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Completing the schedule

Once this schedule has been developed you should fill in the details of the dividend paid by the company. The amount of the dividend and the date of the dividend paid will flow through onto the parent schedule, the period for which the dividend was paid will simply remain on this schedule.

Relevant Profits Calculation

Once you have entered the details of the dividend paid you will have a red error until you have completed the Relevant profits calculation.

There are three columns in which you can enter the periods out of which the dividend was paid. If the dividend was paid out of more than three periods you can insert additional columns here by either pressing the Insert key when the cursor is on one of the data entry columns, or going to the Edit menu and choosing Insert, or alternatively using the Insert icon.

You can enter the accounting periods in any order but if you do not enter them in reverse chronological order the software will prompt you to use the Sort columns button at the end. This can be done, however, once all other details have been completed.

Having entered the dates you can then enter the details of the companies Own Profits for the period concerned. There are six rows available for adjusting this figure beneath the Own Profits row. These have been titled with suggested headings but these may be over-typed if required.

You will need to make any adjustments to arrive at the profits figure for each year in accordance with SP 03/01. If there are losses, for example, these will need to be reversed, if there were previous distributions out of those profits these will need to be deducted, and if there were dividends received these will need to be included. The total for each row should either be the amount of profits of the period which are still available for distribution, or zero if there were losses which have been reversed out.

There is a data entry row for dividends included in the above. If there were previous distributions out of the profits the amount of the dividends received (entered as part of the relevant profits calculation) and the amount to be entered here (relating only to the profits still available for distribution) may not be the same.

The software will then calculate how much of the profits still available for distribution (including dividends received) from each period need to be utilised in the relevant profits calculation.

The software then excludes the dividends received by pro-rating the profits excluding dividends down to the amount needed to satisfy the dividend. This figure is fed back up to the top of the schedule and from there it is fed on to the analysis of distributable profits schedule.

Tax Applicable to Own Profits

The tax paid from each period can be entered here. The software will assume that the tax relates only to those profits still available for distribution so any adjustments made to the profits of the period may need to be reflected here too. Where tax was paid on dividends received this will need to be reversed out as it will need to be re-entered on an Analysis of distributable profits profits schedule.

This figure is fed back up to the top of the schedule and from there it is fed on to the Analysis of distributable profits schedule.

Completing

Having completed data-entry on the schedule you need to ensure that the columns are sorted correctly, and then return to the Analysis of distributable profits schedule to complete the details there. If there were dividends received in the period from which only part of the profits were included in the relevant profits calculation, you will need to proportionately reduce the dividend entered on the Analysis of distributable profits so that it represents only the amount of the dividend needed to satisfy the relevant profits calculation.

Using foreign currencies

This schedule should be formatted to be the same currency as the schedule it is supporting. For more details, see Working with foreign currencies.

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Relevant profits

Background

Developing the schedule

Completing the schedule

Standard sub-schedules

Carry forward

Related errors