Is it Legal to do this in the UK?

[Jazz1966]

I was watching an American documentary.
In this, a couple opened the American version of a limited company.

They then worked hard for a year and built up a nice surplus in their company. They took out dividends only. All company and personal taxes were paid.

Via the company, they took out a 5-year lease for a car.

They stopped work in year 2. For the next 4 years they lived on dividends but also had the lease car.
The lease car and dividends were paid for out of retained profits with no income coming into the business.

Would this be valid to do in this country?
Or would this be viewed with suspicion by HMRC, as the company is not doing any trading from year 2 onwards, with the directors living on retained profits and having the use of the lease car?

[atticus]

I see nothing unlawful in what you describe. If the company is meeting its obligations in respect of the car lease and anything else, and dividends are paid out of distributable profits or reserves (these have a specific meaning in company law), then all appears to be in order.

Most start ups do not make that kind of profit in just 12 months.

[Jazz1966]

I see nothing unlawful in what you describe. If the company is meeting its obligations in respect of the car lease and anything else, and dividends are paid out of distributable profits or reserves (these have a specific meaning in company law), then all appears to be in order.

Most start ups do not make that kind of profit in just 12 months.

Thank you kindly for taking the time to reply. I only thought it odd, as the Company was not trading, and HMRC would think it fishy that Directors/Shareholders had a leased car but there was no new income coming in. I can see your point of view. As CT has already been paid on the retained profits, I guess the only income would be the reclaiming of VAT on the car but that should not be that much to upset the VAT man

[HariSeldon]

I guess the only income would be the reclaiming of VAT on the car but that should not be that much to upset the VAT man

You would not be able to continue reclaiming VAT if the company wasn't trading as the car is no longer being used for business purposes.