Avoiding 50% tax with dividends

[simplytax]

Are any issues forseen with the following proposed plan of action.

Director/shareholder planning to take large dividend £0.5m in Feb. lend the money back to the company and then take another £0.5m in March. Advancing income to pay tax at 25% on net dividends ie £250k to avoid paying tax after 5 April at 36.11% on net dividends. ( cashflow cost on paying tax a year early but still a saving )

Company has the retained earnings but not the cash to pay £1m hence the need to lend back £0.5m to enable payment of the further £0.5m.

Director in recent years taken relatively small salary £30k and large dividends each year.

Any problem with anti-avoidance and abnormally large dividend in one year ?

Other shareholders may do something similar but not pro-rata as different classes of ordinary shares. Wife may also participate as shareholder with different class of share.

Is this sensible planning or any potential risks ?

[Budget83]

Without knowing the structure of the company if you have the retained earnings you can declare the dividend at any time you like. Declaring a dividend is a balance sheet adjustment so there is no need to pay it and pay it and then inject the capital back into the company. The liability will be shown on the balance sheet(Directors loan account) and can be paid when the cash is there.

However without looking at your accounts and structure I woulnt like to comment if it is possible or a good idea. When you are dealing with these sums of money I would reccommend that your accounts are prepared with a professional local accountant and they will declare the dividends in the most tax effecient mannor.