Sam Hart looks at what might make a dividend illegal, and what that would mean for your tax position.
While not as tax-efficient as it once was, taking dividends from your company is one of the most common ways to extract business profits, and for owner-managed businesses it is often the cornerstone of how remuneration is structured. However, tax is not the only consideration and company law considerations must be taken into account when looking to pay dividends.
Here, we look at what an illegal dividend is, when one can arise, and importantly, how HMRC is likely to treat it if things go wrong.
