Readers’ forum: Should standing order be treated as dividend?

I’ve taken over a new close company client and have been reviewing the director’s loan account. Like many business owners she has treated the company’s money as her own and the previous accountant has taken spending on personal items to the loan account as and when he has written up the books for her. But she also has a standing order under which a set sum is transferred to her personal bank account each month. There is no paperwork to support this payment.

The previous adviser has treated each of these individual payments as a dividend and then has cleared the balance on the account post year end by posting a sweep-up dividend. I don’t think that this is right – in the absence of any documentation I think that the regular payments are simply loan account items and are not dividends.

Does this make a difference in terms of...