The private company's distributable surplus is the maximum amount that can be treated as a deemed dividend. The company that made the payment or loan or forgave the debt will have to determine how much of the payment or forgiven debt is to be treated as having come from their distributable surplus. The distributable surplus is worked out at the end of the company's year of income using the following formula:
Net assets − non-commercial loans (see note) − paid up share value − repayments of non-commercial loans
Note: Non-commercial loans are loans which have previously been treated as deemed dividends.