Issue of preference shares to extract cash

As well as 'ordinary' shares preference shares can be issued. These carry a right to a fixed amount of dividend. The receipt is therefore akin to loan interest as its a fixed amount but it is still treated as a dividend for tax purposes. Therefore as well as ordinary shares a company could issue preference shares to its shareholders to allow a fixed return. You should note however that the Revenue will generally not accept these if they pay a net coupon on the nominal value of much greater than 10% per annum. Therefore in order to receive an annual income of £10,000 you would need to issue shares with a value of over £100,000. If the shares weren't fully paid up (ie you only paid say 1% of the value (£1,000)), there would be the risk that the Revenue could reject them. In addition if the subscription monies were left as an interest-free loan to the directors, there could be a benefit-in-kind charge under income tax against the interest-free element.