Arctic Systems in lords

[ASB]

Does this indirectly have an impact on IR35 as well?

IIRC, IR35 can only apply if you are a director owning more than a certain percentage of the business. If shares in the company are sold / given / allocated to my wife and children, such that I own less than that level, does that clear me for IR35?

The percentage is 5%. Also it includes associates.

[Burdock]

The percentage is 5%. Also it includes associates.

eh? By redistributing shares, we can remove ourselves from IR35?!

if this is true, my dear old momma has just acquired a major share-holding in Burdock Ltd.

[TheFaQQer]

eh? By redistributing shares, we can remove ourselves from IR35?!

if this is true, my dear old momma has just acquired a major share-holding in Burdock Ltd.

You just need to find 20 more people to give shares to, that you don't mind paying money to when you pay a dividend.

Of course, they could always waive their right to the dividend each time...

I was hoping it was much higher, so I could give out some shares to the wife and kiddies, and avoid IR35 completely. Oh well.

[fzbucks]

You just need to find 20 more people to give shares to, that you don't mind paying money to when you pay a dividend.

Of course, they could always waive their right to the dividend each time...

I was hoping it was much higher, so I could give out some shares to the wife and kiddies, and avoid IR35 completely. Oh well.

can a group of 20 contractors each have a 20th in each others company - i suppose then though they would all have to be given the same dividend

[Burdock]

You just need to find 20 more people to give shares to, that you don't mind paying money to when you pay a dividend.

we could set up a reciprocal scheme on here! all owning shares in each others co's

like that wouldn't lead to much wailing and gnashing of teeh (and possibly bloodshed!)

[ASB]

Reading the text it seems the Lords agreed with all of the IR arguments.

But:-

30. Finally, the revenue say that the property given, i.e. the share, was "wholly or substantially a right to income". It is true that the value in the share arose from the expectation that it would generate income. But that is true of many shares, even in quoted companies. The share was not wholly or even substantially a right to income. It was an ordinary share conferring a right to vote, to participate in the distribution of assets on a winding up, to block a special resolution, to complain under section 459 of the Companies Act 1985. These are all rights over and above the right to income. The ordinary share is different from the preference shares in Young v Pearce (1996) 70 TC 331, which conferred nothing except the right to 30% of the net profits before distribution of any other dividend and repayment on winding up of the nominal amount subscribed for their shares. Those shares were substantially a right to share in the income of the company.

It seems they feel strongly that an ordinary share is not wholly or substantially a right to income. Which is precisely what a lot of people have been saying for a long time.

[ASB]

eh? By redistributing shares, we can remove ourselves from IR35?!

if this is true, my dear old momma has just acquired a major share-holding in Burdock Ltd.

Yes, it is true. But the scheme you propose is likely to fail if you read the small print.

But 20 people each with 5% of newco would work. Provided they are not connected, all receive the same dividends etc. Oh and it's likely that the combined profit would exceed tohe small companies rate of CT anyway.

[Let-Me-In]

SJD have just released an email about it:


SJD Accountancy

PCG tax victory for family businesses. Arctic win at House of Lords

The House of Lords has today ruled in favour of Geoff and Diana Jones
of Arctic Systems Ltd in a judgment that has removed a tax threat from
thousands of family businesses throughout the UK.

HMRC attack on companies that are jointly owned by one revenue-earning
partner and one non-earning partner has been rejected. Geoff and Diana
Jones, supported by PCG, have succeeded in their three-year struggle to
stop the Revenue reinterpreting tax law retrospectively.

Please note - SJD Accountancy need time to analyse the information
given by the 5 Judges before we can issue any concrete advice about making
your spouse, partner or family member a shareholder in your company.
Obviously we will let you know as soon as we have had an internal
discussion in this regard.

Matthew Durrant
Partner.

[Lewis]

http://news.bbc.co.uk/1/hi/business/6915359.stm

[Bluebird]

Whilst all this "feelgood" stuff about Artic is great [ I for one hold a 50% share with my wife so we both recieve dividends ], if the ruling had gone in favour of HMRC would that only mean that in order to avoid paying higher tax you'd just need to keep within the £38k limit of salary/divis/interest ?


Shouldn't that be enough to live on anyway ?