Ltd company accounts.

[multilingual]

I met up with a local chartered accountant today, and during our conversation I mentioned that we run a Ltd company.

He asked about the accounts and (without giving too much away) I simply told him that the directors have a small salary and top up their income by taking out dividends.

"That's illegal!" he told me, which rather surprised me. :shock:

I did argue against that statement, but not being an accountant myself I felt that I was on unsure ground so in the end I decided it would be better to just change the subject!

So is this illegal, or is the guy way out of touch?

I am going to email my accountant now.

:?

JB

 

[uksbc]

i would be interested to hear the opinions on this

an accountant i had about a year ago also advised the same thing :cry:

 

[Alpha]

Not sure where the 'chartered accountant' is getting his ideas from. There is nothing illegal with taking a minimum salary and extracting profits as dividends.

The only time that it would be illegal is if the company were to pay dividends without having sufficient post tax profits which is why before declaring interim dividends, some form of accounts have been produced to prove the existance of such.

The only other areas where the revenue may possibly attack this type of system would be if monthly dividends of the same amount were declared or if monthly deductions of the same amount were made but then covered by a dividend at the end of the year (Both may have the revenue declaring them as disguised salary)

There are situations where the revenue are attempting to force this issue (artic systems) in certain circumstances.


Providing that the rules are followed and the paperwork is produced (minutes declaring dividend, dividend vouchers produced etc) then there should be no problems.

 

[multilingual]

Thanks Alan.

My accountant is saying much the same, as well as a few choice expletives about people getting their facts right!

Now that I have a bit more information on the subject I feel more confident that we are doing everything straight down the line.



JB

 

[Astaroth]

Certainly the chartered accountant I was discussing these sorts of things with recently said that it was perfectly legal if not "moral" but did mention that the powers that be are looking at reforming the laws to close the loophole.