Potential "income Shifting Tax" Legislation

[Lewis]

http://www.shout99.com/contractors/s...le.pl?id=49759

"BBC website ... [Income Shifting] billed as the tip for the third u-turn on taxation, after non doms and corporation tax rethink."

[malvolio]

I'll believe that when I see it. Best guesss to date is that he exempts companies with a turnover under £50k or something equally stupid.

[chris79]

I'll believe that when I see it. Best guesss to date is that he exempts companies with a turnover under £50k or something equally stupid.

I'm no accountant, but there would be very little advantage in HMRC pursuing this legislation against any company turning over less than ~£50k between two people given the current tax bands.

(Not trying to be sarcastic, but this would be the case right - i.e. if they were to recalculate the majority of the profits under one persons allowance it would come out very roughly the same as if split between two people, or one person earning the lions share, and the other earning a £5k a year part-time job as the company book keeper).

[moorfield]

Nothing stopping the wife being say a 51% shareholder director and the contractor 49% a non-director ? Technically speaking the contractor has no power then to control the income shifted ?

Have our accountant members anything to say on this (income shifting) topic yet ?

[TheFaQQer]

I'm no accountant, but there would be very little advantage in HMRC pursuing this legislation against any company turning over less than ~£50k between two people given the current tax bands.

Relatively speaking, there's very little advantage in HMRC pursuing this legislation against ANY company - IIRC the total that HMRC can expect to bring in is somewhere in the region of £260million.

Which given the amount of money they pumped into Northern Rock is pretty puny by comparison.

[malvolio]

Nothing stopping the wife being say a 51% shareholder director and the contractor 49% a non-director ? Technically speaking the contractor has no power then to control the income shifted ?

Have our accountant members anything to say on this (income shifting) topic yet ?

Yes, they are still "connected persons" and are deemed (that word again) to have equal say in matters regardless of the actual share split.

I'm no accountant, but there would be very little advantage in HMRC pursuing this legislation against any company turning over less than ~£50k between two people given the current tax bands.

I didn't say it was a practical measure, it is something that looks like a practical measure even if it achieves nothing at all and will persuade Joe Sunreader that HMRC are listening to their concerns. Darling Alistair is a politician, not an businessman.

[Lewis]

So what are people on here going to do from April ?

Taking back the wife's/girlfriend's/civil partner's shares ? Keeping more money in ltdco ? Putting more into a pension ?

History has taught me to not rush into anything. I'll keep things as they are (50/50 shares) but declare no dividends for as long as I can. In the hope something will turn up, be that a get out clause or test case or something. Only if I really need the money and can't wait will I do a share transfer. Maybe to something like 90/10 rather than 100/0. I'll also be keeping a keen eye on QDOS to see if they release a new insurance product. I think it's just too soon at the moment to make any plans as we don't even know what the final legislation looks like yet (although we can make a good guess!)

[Lewis]

Nothing stopping the wife being say a 51% shareholder director and the contractor 49% a non-director ? Technically speaking the contractor has no power then to control the income shifted ?

Have our accountant members anything to say on this (income shifting) topic yet ?

It would be nice if it was that easy, but I can't see it working. I think there is a clause about having "influence" over the dividend decision. I suspect they will argue the husband has influence over the wife's decision, something along those lines ... I've heard your idea mentioned before and people say it wouldn't work.

[moorfield]

History has taught me to not rush into anything. I'll keep things as they are (50/50 shares) but declare no dividends for as long as I can. In the hope something will turn up, be that a get out clause or test case or something.

I was thinking along the same lines, but ask (not influence!) the missus to consider waiving her divis until further notice. I don't think that the new proposals will apply to waived divis (or force them to be taken) but I could be wrong on that.