During the COVID-19 crisis, Government has made funds available to help businesses survive lockdown and HMRC has allowed their debt to be deferred.
The same is true of some banks with loans and overdrafts being rescheduled as they appreciated that if your business wasn’t trading, you had little coming in to pay them.
Some of that money, be it loans or cash created by not paying for example HMRC or suppliers, may have been used to pay directors the money they need to pay their own bills.
That may have been a salary which may be more than normal, as they haven’t taken a salary due to their being little cash available, dividends or either as a loan from the company to the director, or repaying existing loans from directors.
Some of these actions may be following previous advice to help maximise post tax income for the director.
However, if the company fails, the appointed liquidator or administrator will review those payments to see if any can be recovered, using insolvency legislation, for the benefit of the company creditors.
Some of the payments will be preferences or illegal dividends, or could be outside of the normal activity of the company at a time when it is unable to repay its debts.
The risk of having to repay the money received by you can be reduced or removed by taking professional advice from us before making those payments.
It may be that the issue that is likely to cause the company to fail, can also be avoided with our help.
Contact us HERE or call us on 01476 574149 for a free consultation.