Accruing illegal dividends
Owner-managed consultancy business, sole shareholder, company is £1k insolvent. No creditors whatsoever, other than my fees and a £2k directors loan account in credit!
Director has taken a £7k salary during the year and has no other income, he wants to issue himself a £25k dividend in order to make use of his personal tax bands this year, the dividend will simply be credited to his directors loan account and drawn down in future years when the company starts making some money.
I've briefed him on the fact that it would be illegal dividends and that should the company go into liquidation in future then he would have to repay the dividend, however he now knows the risks and to be honest the business will never go into liquidation, it's simply a consultancy business just outside of IR35 territory.
As far as I'm concerned I feel that I've covered my back with regards to giving advice, which will also be given in writing.
Can HMRC object to this? The dividend will one day be paid. Would welcome some thoughts on the practicalities of this please. And also does anyone else put a note in the accounts stating that an illegal dividend has been issued or is that considered overkill? No banks or suppliers will be relying on these accounts so a note doesn't really concern the client.
- Which profit figure to use 160 2
- Audit partner? 327 7
- Penalties for an amended p35 (2012/13) 58 1
- 2 sole traders merging to become a limited company what do they need? 257 9
- home office expenses as a director 157 6
- How to prove to HMRC that you was not self employed? 835 22
- Sick pay 131 2
- Undeclared rental income 272 5
- Home Use Costs in Company Accounts ? 214 4
- Drop box Storage 883 9
- Drop Down Boxes 157 2
- Unfurnished Lettings Expenditure 216 5
- Any Scottish members out there? 13,390 498
- CIS paid under reg 9 212 1
- PAYE Refunds from HMRC 185 4
- rti 242 9
- Cash injection by shareholder 730 9
- Another goodwill question ....... 244 2
- FIFA game and making money 1,762 15
- Subsistence expenses for one man band contractor companies 413 7
- Raiders of the Lost Tax File 1,404
- Chartered Accountant in County Down N.Ireland 535
- National Insurance 436
- Non Resident 328
- Hands on experience of Digita 256
- Best way to take money from a business if you have unlimited EIS allowances? 241
- Employer's Helpline 194
- Does anyone use PS Financials accounting software out there? 163
- Commercial rental property - still Schedule A? 159
- Umbrella pay services 134