Background
The appellant was the sole director and shareholder of a trading company. For a number of years, the appellant drew money from the company as director’s loans. At the end of the year, a small amount of remuneration and larger dividend were credited to the director’s loan account. However, director’s loans remained outstanding and increased over a number of years.
The appellant became concerned about the state of the company’s business. He sought advice from an insolvency practitioner, who advised him to put the company into liquidation. The insolvency practitioner also advised the appellant that there were insufficient available profits for the company to pay dividends, so payment to the appellant would have to be wholly by way of salary.
The appellant’s accountant was instructed to prepare accounts showing an amount of director’s remuneration
