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Illegal and unlawful dividends post-pandemic: What's the difference?

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Jennifer Adams considers whether there is a difference between an 'illegal' and an 'unlawful' dividend and warns that we may see more of such dividends post-pandemic.

12th Jul 2021
AccountingWEB
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In June, a member asked about transferring what he saw as 'illegal' dividends to the Directors Loan Account.   

Justin Bryant commented that "most dividends aren't done properly and so are illegal (or otherwise void) one way or another” but the member quoted CTM20090 which states that 'Frequently the dividend is found to be paid unlawfully'. 

Although the section quoted referred to the now abolished Advance Corporation Tax, the word is also used in the updated text CTM 15205 which states that 'Failure to comply with these requirements will mean that the distribution is unlawful'. 

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Replies (5)

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By ABD
13th Jul 2021 11:23

Tom7000 template refers to S455 at 25% whilst it was correct at the time the comment was made it is now out of date and should say 32.5%

Thanks (1)
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By Paul Crowley
13th Jul 2021 17:20

There are going to be lots of them, with inadequate sums to pay the s455
PAYE and NI costs could be even higher.

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By sanjay100
13th Jul 2021 18:09

Not everyone will have an accountant and spend the BBL. Obviously they will be oblivious to S.455.

I think it is vital that accountants review their client books at an early stage where a BBL has been taken and warn them of the implications with S.455 and Benefit in Kind

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Replying to sanjay100:
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By Paul Crowley
13th Jul 2021 22:50

Worry about when I see it
Nothing new, rules have not changed. Companies have always been able to borrow money.

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Jennifer Adams
By Jennifer Adams
14th Jul 2021 18:04

Yes.. Paul - I know its not new but with the BBL being made so freely available there are going to be many who dont know the rules.

I have one now - the minute the money hit their bank account it was taken out as 'drawings'.

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