Increase In Directors Taking Illegal Loans
The recent recession and credit crunch has had a huge impact on many individuals in the UK over the past few year and many firms and companies have seen their profits fall dramatically over this period, as their customers struggle to make ends meet financially.
Despite this, it seems that a growing number of company directors are intent on maintaining their income and lifestyle in the same manner as they had done previously, even if this means taking illegal dividends or a loan from the company.
One insolvency firm has seen a growing number of cases where a director has taken more than they were entitled to either in the form of a loan or as dividends. Keith Stevens of Wilkins Kennedy, claims that in 80 per cent of recent insolvency cases with companies, directors have taken illegal loans or dividends.
HMRC are now one of the largest providers of unsecured loans to UK companies who are declaring themselves insolvent, in the form of unpaid tax bills and as a result of this, the revenue are keen to pursue cases where illegal loans and dividends have been taken by directors and have asked for assistance from insolvency practitioners in tracking these cases down.
With a growing number of businesses becoming insolvent, it appears that the problem is getting worse. The number of directors facing disqualification has increased by 17 per cent over the course of the last twelve months.
Keith Stevens said “A couple of holiday homes, a taste for sports cars and an expensive divorce settlement will normally come with a big debt that needs servicing every month. For some owner- managers it seems easier to break the rules and take an illegal loan from the company than to curb their spending.”
“HMRC wants these directors banned and they want to pursue these directors through the courts for all the money that they can. That is an obligation that HMRC have, so directors need to be aware of that. Directors need to be careful not to treat their business as a personal piggy bank.”
