Extraction of Company Profits

Shareholders can only extract profits by way of dividends.

A dividend can only be paid when the company can demonstrate that profits have been made as it is against the Company's Act to make a dividend distribution when profits do not exist.

At the time a dividend is paid appropriate dividend documentation needs to be completed which should be provided to each shareholder. No tax is payable at the time the dividend payment is made to shareholders but the company will need to account for tax on its profits at a later date. The shareholder will need to report dividends on his or her Tax Return which may give rise to additional liabilities.

No employee or employer National Insurance Contributions are payable on dividends.

Directors can obtain monies from companies via additional bonuses or salary which gives rise to additional PAYE and National Insurance. Directors therefore should extract any money they may have loaned to the company by way of directors loan account before considering the taxable routes. Interest may be charged to the company on the director's loan.

Directors and employees should examine their benefits package and pension contributions as tax efficient methods of acquiring funds.

If any person sells an asset to a company, e.g. goodwill, a computer or a motor vehicle, they are entitled to be paid for it. This may assist in extracting funds.

For further advice email us at specs@moco.co.uk