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Global Corporate v Hale (2019)

Mr Hale was a director of a limited company that entered into Liquidation in 2015. During the Liquidation it was discovered that he had been drawing a salary at the National Insurance threshold, as well as £1,383 as dividends each month.

This continued over a number of years, with the Company’s accountants deciding retrospectively if there were profits at the end of the year to which these dividends could be allocated. These were declared as additional sums for PAYE, which they were not.

The High Court case found for Mr Hale, i.e. that the payments were actually salary, regardless of their tax treatment.

This therefore meant that director-owners could pay themselves dividends regardless of the actual profits of their business; having them reclassified if they were later considered unlawful dividends.

In November 2018 the Court of Appeal overturned this ruling. It established that the payments made to Mr Hale could only be dividends. They were also illegal dividends, as there were insufficient reserves to pay them at the time, and they were therefore repayable.

This case was discussed in more detail in our recent CPD Tap webcast.

Posted: 26.03.2019
Tags:  newsletter  announcement

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