CBR warns on loan-based dividend risk

Company directors who take a proportion of their salaries as dividends could be building up a significant liability if things do not go according to plan, warns insolvency experts, Cranfield Business Recovery (CBR).

It is acceptable and legal practice for accountants and financial advisers to recommend owner directors of companies to take a minimum salary and the rest of their annual remuneration as dividends, which are posted to the directors' loan account. Dividends can only be declared out of retained profits and there are savings on PAYE and National Insurance bills.