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What are illegal dividends?

Illegal dividends, or unlawful dividends as they are also known, is when there are insufficient retained profits within the company to cover the dividend being paid. The technical definitions of this can be found at Section 830 of the Companies Act 2006 and reads as follows: “A company’s profits available for distribution are its accumulated, realised profits, so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital duly made.” Dividends vs Salary A director of an owner managed business, where they are the sole director and shareholder, may ask why not just keep things simply and just receive a salary. The popularity of the split between dividends and salary is due to the tax benefits this arrangement achieves:

Tax Errors: 8 Most Common Business Tax Mistakes

Owning your own business is a rewarding experience. However, as many entrepreneurs learn, it also means putting a great deal of work into getting things right – from marketing to consumers, to keeping up with the books. Often, young businesses place the majority of their focus on the concepts of sales and customer acquisition, meaning that taxes can take a backseat. Unfortunately, if you fail to start thinking about your tax needs until your company has already begun to earn revenue, or tax season falls on top of you, your business may already been in trouble. Following, we will cover some of the most common mistakes that businesses make when it comes to filing and paying their taxes. By recognising the areas you’re most likely to struggle, you may be able to avoid tax trouble in the future, and even save money for your business through the use of appropriate deductions. 1.   Failure […]
By |January 21st, 2016|Tax|0 Comments
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    How should you finance your business in today’s world? [Infographic]

How should you finance your business in today’s world? [Infographic]

Small business funding – what a minefield. If a business wants to expand, then it will need money. Unfortunately, many business owners finance their company incorrectly and put its very future at risk. When it comes to financing a business, the most common option is to borrow money and take on debt. But taking out a business loan has advantages and disadvantages. The question is, should you go down this route?  
By |November 17th, 2015|Tax|0 Comments

New HMRC cash grab

Under new proposals announced in the Budget 2014 small print, the taxman will be able to access personal and business bank accounts to directly take any arrears of tax you may owe. How will it work? If you, or your business owes more than £1,000 in arrears of tax (inclusive of all forms of personal or business taxation), you could be at risk. Under new proposals due to come into force in April 2015, HMRC will be able to dip into bank accounts. They will not require a court order, nor will they have to issue formal proceedings – as long as they have sent reminders chasing tax arrears. So if you or your business owe more than £1,000 and have been sent correspondence from HMRC, under the new proposals, cash can be taken directly from your bank accounts to settle HMRC debts. HMRC will be required to leave a minimum of […]

The Tax Man toughens up

Over the past 2 years, we’ve noticed a much more vigorous approach from HM Revenue & Customs in collecting business taxes. The reason behind this increased activity is undoubtedly the Treasury looking to alleviate the effect of its decreasing tax receipts by tightening its enforcement arms collection methods. The effect has been stark, in the 2010/11 tax year, HMRC issued 3,367 winding-up petitions, whilst in 2011/12 there were 5,302 issued. Extrapolating out from the activity Robson Scott has seen, I wouldn’t be surprised if that increased to almost 7,000 for this tax year. HMRC’s investigations units have been unlikely winners whilst other departments have suffered swingeing cuts. £917 million in extra funding has been promised, with the quid pro quo that the Treasury expects HMRC to generate a further £7 billion in recovery of taxes that would have otherwise remained unpaid. The main upshot from this is that official investigations into businesses and […]