likely cost....setting up alphabet shares

[trogs109]

hi all
new here and have a question
my wife earns about 28k, is it worth me setting her up as a shareholder
someone mentioned to me this would need to be alphabet shares due to her job
does anyone know what the likely cost of setting this up may be and if it is worth doing
all my other accountancy things are set up just want ed a ballpark figure if possible

thanks for looking

[Clare@InTouch]

I'd advise against alphabet shares as it's something HMRC look for when investigating under section 660 (income shifting). It shouldn't be an issue as you're married, but why raise your profile when you could just as easily get the same result by careful planning. Dividends are paid out in proportion to shareholdings so if your wife can take £13,000 in dividends before higher rates you just need to set the holdings to ensure the right distributions to get you to the higher rate band too. 75:25 for example would see her get £12,000 when you got £36,000. The optimal holdings will be determined by your overall income.

Your accountant should be able to help with the calculation, and with the share transfer.

[northernladuk]

There is a nice little article explaining ABC shares in the link below. It is dated 2006 so pretty dated but gives a nice overview of what they are, strenghts and weakness's. Not something to base your decisions on maybe but helps with basic understanding...

ANY ANSWERS: The ABC of alphabet shares. By Nichola Ross Martin | AccountingWEB

[kaiser78]

I'd advise against alphabet shares as it's something HMRC look for when investigating under section 660 (income shifting). It shouldn't be an issue as you're married, but why raise your profile when you could just as easily get the same result by careful planning. Dividends are paid out in proportion to shareholdings so if your wife can take £13,000 in dividends before higher rates you just need to set the holdings to ensure the right distributions to get you to the higher rate band too. 75:25 for example would see her get £12,000 when you got £36,000. The optimal holdings will be determined by your overall income.

Your accountant should be able to help with the calculation, and with the share transfer.

I am not sure if the above still applies but I have one accountant stating that HMRC doesn't approve of ABC share classifications being used for incoming shifting scenarios as per the above, and another stating that this is actually okay.

Can anyone please confirm their interpretation/understanding of the rules ?

[Alan @ BroomeAffinity]

There's no dubiety here. Alphabet shares are a massive no no. Forget it.

[northernladuk]

Had the same the advice from my current client recently.Alphabet shares are a step too far.

[Alan @ BroomeAffinity]

Current advice (for abt the last 4 years at least) is that the 2 things your MUST avoid is ABC shares snd dividend waivers. By all accounts this is an area of focus by HMRC.

[TheCyclingProgrammer]

Current advice (for abt the last 4 years at least) is that the 2 things your MUST avoid is ABC shares snd dividend waivers. By all accounts this is an area of focus by HMRC.

I'm aware of HMRC challenging waivers as settlements in their own right but have HMRC successfully pursued anyone using alphabet shares under settlements legislation? Or even sniffed at it? If they are ordinary shares with the same rights as the other ordinary shares then surely the Arctic defence would be unaffected?

I'm not disputing that it's one of the things that would catch the eye of HMRC (it's one of the factors listed in their settlements guidance manual) or that it's best to be conservative with your approach to "income shifting" but I'm curious as to how HMRC could use the settlements legislation to attack different classes of ordinary shares or is there other legislation they could use?

[northernladuk]

My question in response to that is bear I'm mind the advice is pretty universal how many people ignore it and do it anyway? Deterent appears to be the first line of attack so how many people do it against those that have had it investigated could be higher than we think?

Wouldn't we only know what they've challenged when someone requests it or it goes to court? Out of sight might not mean it's out of mind?

[Iliketax]

You might also want to ask your accountant about the new financial products hallmark for DOTAS. You may well find yourself with an APN if HMRC think you are avoiding tax (e.g. because of Chapter 3B or Chapter 4 of Part 7 ITEPA).