Many directors choose to take their remuneration through dividends rather than salary because it is meant to be more tax efficient. They make a monthly charge to their loan account (creating an overdrawn director’s loan account) which is then repaid by a dividend at the end of the year. This is fine while the company is making a profit, but if no profit is made then there can be no repayment of the loan account from dividends.
If the company enters a company voluntary arrangement, it is virtually certain that the
conditions of the arrangement will call for a repayment of the overdrawn loan account. This means that what you thought was a good way to avoid some tax will now have to be repaid in full -
Let us show you how to solve this problem.
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