Husband - Wife shareholding

[malvolio]

Surely you just had to pay out all the Ltd money in divis once divorce loomed. Infact a good excuse to shut the Co down and use your CGT allowance for a bit of tax dodging. I've got all the family money in the wife's name for tax reasons but she conveniently doesn't know the passwords to any of the bank accounts or her share trading account.

So you are quite clearly practising tax evasion then. Send for the cops, chaps...

[ASB]

Nope...left all the cash in the company (it was tax exempt as it was from overseas earnings) and my kids bought her 5% off her...it wasn't an easy process but some clever arguements (all of which I don't understand) meant she couldn't get her grubby hands on my business!

Now my kids will get divi's each which goes straight into a trust fund which is frozen until they are 18...

Unfortunately that may well be ineffective.

The kids are minors. Where did they get the money to buy the shares.

If it was either you or your ex-wife then the divi is asessable to you under the settlements legislation anyway. If the money came from elsewhere (e.g. grand parents, paper round etc), then you will need good evidence to back up the claim. If it is is any way tainted with other funds (e.g. all gifts etc went through one building socienty account then you will struggle to prove which specific money was used for the buyout).

If the shares are still nominally held by the minor children (they can't hold them themsleves so they must at least be in a bare trust) then some caution is necessary. It's best to draw up a formal trust deed and get it stamped at the relevant revenue office. Although simply designating them under ownership is usually enough it is best to formalise it with the IR.

If the trust is either a discretionary or an accumulation and maintenance trust then the situation may be slightly different, but in any event the tax treatment is unlikely to yield much if any savings.

[Vito]

Unfortunately that may well be ineffective.

The kids are minors. Where did they get the money to buy the shares.

If it was either you or your ex-wife then the divi is asessable to you under the settlements legislation anyway. If the money came from elsewhere (e.g. grand parents, paper round etc), then you will need good evidence to back up the claim. If it is is any way tainted with other funds (e.g. all gifts etc went through one building socienty account then you will struggle to prove which specific money was used for the buyout).

If the shares are still nominally held by the minor children (they can't hold them themsleves so they must at least be in a bare trust) then some caution is necessary. It's best to draw up a formal trust deed and get it stamped at the relevant revenue office. Although simply designating them under ownership is usually enough it is best to formalise it with the IR.

If the trust is either a discretionary or an accumulation and maintenance trust then the situation may be slightly different, but in any event the tax treatment is unlikely to yield much if any savings.

Not sure I understand most of this...I'll check it out with my accountant!!

To be honest though I'm not worried if this money gets taxed, it was done as a very genuine way of involving my kids in my business and ensuring that they have savings for university etc when they are older...if it is a tax efficient way of me saving for their future then terrific, if not then that is fine...

[rootsnall]

So you are quite clearly practising tax evasion then. Send for the cops, chaps...

It's called tax avoidance when I do it !

Vito - I think what ASB is saying is that if you pass money onto your kids then it is taxed as though it is yours ie. you give them 1K, it earns 50 quid interest, it's taxed at your tax rate ( 40% tax ? ) not as part of their income ( 0% tax ). If a grandparent gives it to them then it is deemed to be theirs and they can use their own tax free allowance and lower rate tax band.

ASB - my kids have some bare trust investments via grandparents, when can the kids make a grab for the money and we can do nowt about it, 16, 18, younger ?

[Vito]

It's called tax avoidance when I do it !

Vito - I think what ASB is saying is that if you pass money onto your kids then it is taxed as though it is yours ie. you give them 1K, it earns 50 quid interest, it's taxed at your tax rate ( 40% tax ? ) not as part of their income ( 0% tax ). If a grandparent gives it to them then it is deemed to be theirs and they can use their own tax free allowance and lower rate tax band.

ASB - my kids have some bare trust investments via grandparents, when can the kids make a grab for the money and we can do nowt about it, 16, 18, younger ?

If I did it, I would call it Tax efficiency!!

The way it was worked with my kids was that the shares were actually a gift from my ex to the kids (not their mother btw) and I bunged her a couple of extra sofa's from the settlement...so they got their shares in the company through a legitimate external source and any dividends they now earn are surely theirs on not a gift in any way from me...does that sound ok?

As I say, if not then I'm not concerned as it wasn't done for tax EFFICIENCY reasons

[ASB]

It's called tax avoidance when I do it !

Vito - I think what ASB is saying is that if you pass money onto your kids then it is taxed as though it is yours ie. you give them 1K, it earns 50 quid interest, it's taxed at your tax rate ( 40% tax ? ) not as part of their income ( 0% tax ). If a grandparent gives it to them then it is deemed to be theirs and they can use their own tax free allowance and lower rate tax band.

ASB - my kids have some bare trust investments via grandparents, when can the kids make a grab for the money and we can do nowt about it, 16, 18, younger ?

18.They become theirs absolutely. Of course if they don't know where the passbook/certificates etc are....

[ASB]

If I did it, I would call it Tax efficiency!!

The way it was worked with my kids was that the shares were actually a gift from my ex to the kids (not their mother btw) and I bunged her a couple of extra sofa's from the settlement...so they got their shares in the company through a legitimate external source and any dividends they now earn are surely theirs on not a gift in any way from me...does that sound ok?

As I say, if not then I'm not concerned as it wasn't done for tax EFFICIENCY reasons

Probably. The bit that catches gifts to minor children can be found in here:-

http://www.hmrc.gov.uk/practitioners/guide_sba.pdf

660B 5 page 35.

I would think that probably does not catch the income in your case.

But: Do you retain an interest? I would think there is a fairly high risk of that.

However, if you are not a UK taxpayer or only a basic rate taxpayer then the effect of asessing it to you would presumambly be nil anyway.