SCIG12460 - Reaching agreement on income or profit addition: Tax treatment: Extracted income or profits of a company - the normal treatment
Where company money or goods are believed to have been improperly extracted by directors or other persons in control or management positions, the tax consequences will depend on the specific circumstances. The facts should be investigated and understood as clearly as possible before any view is accepted.
The general rule is that a company can only act by and through its directors, and that the acts of the directors are the acts of the company. In considering culpability, the normal treatment of irregular extractions of company income or profits is that they represent understated company income or profits recoverable from the recipients. This is HMRC’s preferred route. See EM8605 et seq. and EM8640 for detailed advice and reference to case law.