A capital contribution is value an owner puts into the company without receiving shares for it – for example a shareholder or parent company waiving a loan the company owes, or transferring an asset for nothing. Rather than going through the profit and loss account, it is credited to a separate reserve within equity: the capital contribution reserve.
What this note shows
The movement on the reserve during the year:
| Editor row | Printed as |
|---|---|
| Balance brought forward | At [day before the period start] |
| Capital contributions received in the year | Capital contributions received in the year (only if not zero) |
| Transfers / amounts utilised in the year | Transfers / amounts utilised in the year (only if not zero) |
| Balance carried forward | At [period end] |
The note is available in FRS 102 Section 1A accounts. It is only relevant if the company has this reserve; most do not.
Where the figures come from
All three input figures are typed in; they are not read from the trial balance. The balance carried forward is worked out for you as brought forward plus contributions received minus amounts utilised. It should agree to the capital contribution reserve shown in the balance sheet, which comes from your trial balance – check the two match before filing.
Enter Transfers / amounts utilised in the year as a positive number; it is deducted. A typical use is a transfer to retained earnings once the contribution is treated as realised.
Completing the note in Tax Optimiser
Open the period, choose View Accounts, then Notes in the left Actions menu. Select Capital contribution reserve in the list.
- Set Show this note in the accounts to Yes.
- Enter Balance brought forward (last year's closing balance).
- Enter Capital contributions received in the year.
- Enter Transfers / amounts utilised in the year, if any.
- Check Balance carried forward against the balance sheet.
- Click Save changes to save the note and rebuild the accounts preview.
The demo company has no capital contribution reserve, so the note is switched off. To explain where a contribution came from (for example "During the year the parent company waived a loan of £50,000"), use Additional note for Capital contribution reserve. There are no wording templates for this note.
How it appears in the accounts
When switched on, the note prints the opening balance, any non-zero movements and the closing balance with a double underline, in a single £ column for the current year. Any additional note text prints below. The demo company does not use this note, so there is no printed example.
Frequently asked questions
What is a capital contribution reserve?
A reserve within equity that records value given to the company by its owners without new shares being issued – for example a shareholder waiving a loan or gifting an asset to the company.
Does a director waiving their loan account create a capital contribution?
Where the director is waiving the loan in their capacity as a shareholder, the waiver is usually credited to equity as a capital contribution rather than to profit. Take advice on the accounting and tax treatment for your circumstances.
Do I enter amounts utilised as negative?
No. Enter them as a positive figure; the note deducts them to arrive at the balance carried forward.
Why does the note not show last year's movements?
The note shows the current year's movement from opening to closing balance in a single column. The opening balance is last year's closing figure.