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  1. #11

    Nice But Dim

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    Quote Originally Posted by Sophieuk View Post
    Hi all,

    I have been contracting for couple of years. I am looking to buy my house and am in need of more cash for my deposit. My accountant advised me to consider making a (non working) friend as my shareholder. I am single so I dont have an option to make my spouse a shareholder.

    My friend can withdraw dividends from my company as a shareholder and give that money to me as gift. Is this a safe approach ? Will I get myself in trouble with HMRC ??

    Any guidance on this topic will be much appreciated. Thanks.

    Regards,
    Sophie
    You (sorry your accountant ) are an idiot.

    1. If your freind becomes a share holder then you must pay them dividends evey time you take them yourself. You cannot do it as a one off event.

    If you issue your friend with shares of a different class to try and avoid the issues in point 1 HMRC will see this as a wholly artificial arrangement for the purposes of evading tax. Penalties, interest, fines, criminal record.....

    2. Your friend will be under no legal obligation to "gift" you the money. Once it is paid to them as dividends it is legally theirs to do with as they wish. You'd be surprised how many "friendships" end when large amounts of cash are involved.

    If you set up some sort of contractual agreement between you to try and mitigate the risk of point 2 then HMRC will see this as a wholly artificial arrangement for the purposes of evading tax. Penalties, interest, fines, criminal record.....

    3. Come April 2016 your friend will be liable for at least 7% dividend tax on any money they receive. Are you going to pay their tax bill for them?

    4. The fact that the money is paid to one shareholder and then instantly transferred to you as company director will mean HMRC will treat that money as deemed income to you and you will be liable for the full tax under PAYE regardless of whether it was "gifted" or not.

    You *MIGHT* get away with it, if HMRC dont notice and dont ask any questions. If you don't the consequences are serious.
    Last edited by DaveB; 26th August 2015 at 09:24.
    "Being nice costs nothing and sometimes gets you extra bacon" - Pondlife.

  2. #12

    Contractor Among Contractors

    Waldorf is a permanent contractor


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    Crazy advice, I recall a large MSC telling its clients to do this, one I recall used his student neighbour!!! No wonder HMRC closed MSC's down.

    Who is this 'accountant' surely not one of the major players?
    "The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance." Cicero

  3. #13

    TykeLike

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    Quote Originally Posted by JB3000 View Post
    Who are your accountants?
    Dewey, Cheatem & Howe
    “Live a good life. If there are gods and they are just, then they will not care how devout you have been, but will welcome you based on the virtues you have lived by. If there are gods, but unjust, then you should not want to worship them. If there are no gods, then you will be gone, but will have lived a noble life that will live on in the memories of your loved ones.”

    ― Marcus Aurelius

  4. #14
    pr1
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    Quote Originally Posted by DaveB View Post
    You *MIGHT* get away with it, if HMRC dont notice and dont ask any questions. If you don't the consequences are serious.
    ... same advice applies to almost any crime

  5. #15
    ASB
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    Quote Originally Posted by Sophieuk View Post
    Hi all,

    I have been contracting for couple of years. I am looking to buy my house and am in need of more cash for my deposit. My accountant advised me to consider making a (non working) friend as my shareholder. I am single so I dont have an option to make my spouse a shareholder.

    My friend can withdraw dividends from my company as a shareholder and give that money to me as gift. Is this a safe approach ? Will I get myself in trouble with HMRC ??

    Any guidance on this topic will be much appreciated. Thanks.

    Regards,
    Sophie
    I am assuming you are already up to the maximum dividend amount to keep you in the lower rate band ?

    If not pay that as a dividend.

    Consider whether a loan might help. You could loan yourself X and repay from next years dividend. Whether or not that gives you enough remaining potential dividend to live on etc next year is obviously unknown.

    Remember the consequences of the loan in terms of BIK and advance corp tax if not repaid within 9 months of the year end.

    This might just enable you meet your objectives without resorting to a number highly questionable tactics.

    Have a read up on the settlements legislation. This should show you why your proposal is such a bad idea.

  6. #16

    Respect my authoritah!

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    Quote Originally Posted by Sophieuk View Post
    ... My accountant advised me to consider making a (non working) friend as my shareholder. ...
    No, he didn't.

    Off to General with you.
    Fact check: Mostly false

    --drunk on abuse of power--

  7. #17

    TykeLike

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    Quote Originally Posted by NotAllThere View Post
    No, he didn't.

    Off to General with you.


    Single female contractor you say?

    “Live a good life. If there are gods and they are just, then they will not care how devout you have been, but will welcome you based on the virtues you have lived by. If there are gods, but unjust, then you should not want to worship them. If there are no gods, then you will be gone, but will have lived a noble life that will live on in the memories of your loved ones.”

    ― Marcus Aurelius

  8. #18

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    Quote Originally Posted by northernladuk View Post
    Damn you beat me to it!
    “Live a good life. If there are gods and they are just, then they will not care how devout you have been, but will welcome you based on the virtues you have lived by. If there are gods, but unjust, then you should not want to worship them. If there are no gods, then you will be gone, but will have lived a noble life that will live on in the memories of your loved ones.”

    ― Marcus Aurelius

  9. #19
    eek
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    bored now

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    Quote Originally Posted by NotAllThere View Post
    No, he didn't.

    Off to General with you.
    Nice to see that NAT hasn't lost his inability to perform simple tasks....
    merely at clientco for the entertainment

  10. #20

    TykeLike

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    Quote Originally Posted by eek View Post
    Nice to see that NAT hasn't lost his inability to perform simple tasks....
    Its a sad state of affairs when RH (who has been AWOL for years) is still not the worse mod!
    “Live a good life. If there are gods and they are just, then they will not care how devout you have been, but will welcome you based on the virtues you have lived by. If there are gods, but unjust, then you should not want to worship them. If there are no gods, then you will be gone, but will have lived a noble life that will live on in the memories of your loved ones.”

    ― Marcus Aurelius

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