UK companies cannot lawfully make distributions unless they have sufficient retained profits to do so. The recipient of an unlawful distribution will be required to repay it to the company where the recipient had knowledge or reasonable grounds to believe that it was unlawful (a knowing recipient). There may also be unanticipated tax charges for both the company and the knowing recipient, particularly where that recipient is an employee in an owned-managed business. Steps can be taken to mitigate these charges once an unlawful distribution has been identified.
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UK companies cannot lawfully make distributions unless they have sufficient retained profits to do so. The recipient of an unlawful distribution will be required to repay it to the company where the recipient had knowledge or reasonable grounds to believe that it was unlawful (a knowing recipient). There may also be unanticipated tax charges for both the company and the knowing recipient, particularly where that recipient is an employee in an owned-managed business. Steps can be taken to mitigate these charges once an unlawful distribution has been identified.
If you are not a subscriber, subscribe now to read this content.
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