A leading accountant says that the number of limited company directors taking illegal dividends or loans has risen at a rapid rate and HMRC wants these directors banned.
HMRC are aware of a sharp rise in the number of allegedly illegal dividends and director loans drawn by the owners of limited companies and have approached insolvency experts to ask them to specifically look at the practice.
Dividends are the post-tax profits of a company. They are distributed to shareholders in proportion to their percentage holding in the company, but you can only pay yourself a dividend if your limited company has enough amassed profits at the time of the declaration.
Speaking on Contract Eye, the accountancy firm believes that many directors may have been tempted to pay themselves particularly generous dividends before the new higher 50% income tax rate came into force on 6th April 2010.
