Dividend paid by client (OMB) when there was cash available but no reserves. I believe that the dividend is repayable and should be accounted for as a debtor in the accounts, but please feel free to disagree. The amount due is subject to tax under s455 as you might expect.
Although the dividend is unlawful, in my view it is still a dividend in which case the shareholder/director is still taxable once dividends exceed £2,000. Result is that until it is repaid to the company there is tax due from the company under s455 as well as tax from the shareholder on the dividend.
I must have been lucky as I hadn't had a problem with clients paying unlawful dividends since dividends became taxable at the basic rate, but am I missing anything?
It's yet another reason to listen when we keep saying that you cannot just pay yourself a dividend when you feel like it but you need to do the background work.