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Company directors warned of pitfalls over dividends.

COMPANY directors who pay themselves excessive dividends may be acting illegally, according to a Coventry accountant.

Laurence Moore, chairman of Prime Chartered Accountants Group, said those who up their dividends to reduce their tax liability could land themselves in trouble.

"The taxman is increasingly likely to argue that excessive or illegal dividends should be re-classed as earnings or be repayable to the company," he said.

"Dividends can still be a tax-efficient solution for directors of limited companies, but it's important to get the details right."

Mr Moore said it was important that directors processed their dividends properly for the purposes of the Companies Act and the taxman.

He said that before paying a dividend, directors should make sure there were sufficient profits to distribute - and be able to prove that by producing management accounts.

He said of the paperwork involved: "This is a complex matter and those in doubt should seek professional advice."
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Publication:Coventry Evening Telegraph (England)
Date:Aug 13, 2007
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