Info on Dividend vs Directors loan?
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freddy
Apprentice
Joined: 16 Jan 2006
Posts: 4
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 Posted: 02/21/09 - 06:41 Post subject: |
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| I was a director of one company for seven years. Now I’m retired and the firm has new general manager. At one meeting, finance manager tried to explain to me that if they don’t declare a dividend now, the firm won’t have to pay taxes for one more year. This really doesn’t make any sense. He also suggested extending the Director’s loan to cover the amount of a dividend. Is this even legal? |
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audrie
Apprentice
Joined: 26 Oct 2005
Posts: 4
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| Posted: 03/12/09 - 21:52 Post subject: |
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| I don’t think that this is illegal, but I still can’t understand the reasons of doing such thing. Loans to shareholders can result in a company’s tax payment after the end of the accounting period. This tax can be repayable after the shareholder repays the loan. Also, interest-free loan to you as a former director may result may be taxable income. The possible advantage to the firm may be that the tax money can be used for one more year and also earn some interest from it. |
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