New shareholder

[itsme]

I want to add my husband as a shareholder to my Ltd company as he is doing bits of work for me and so would like to pay him via dividends.

My accountant has advised against it as it would be seen as income shifting and when the legislation changes I could end up with a hefty tax bill. Can you please confirm they are correct?

[Robot]

I want to add my husband as a shareholder to my Ltd company as he is doing bits of work for me and so would like to pay him via dividends.

My accountant has advised against it as it would be seen as income shifting and when the legislation changes I could end up with a hefty tax bill. Can you please confirm they are correct?

Do it now! New legislation is coming in on 6th April 09, have a happy tax free 2008/09

[TheRefactornator]

Do it now! New legislation is coming in on 6th April 09, have a happy tax free 2008/09

What about retrospectively applied legislation e.g. BN66? Given the track record of the government on issues like this, I think there's a good chance this will happen. The Arctic Systems defeat was the start and they want retribution.

I view it as an another unfortunate random Nu Libor tax raid on IT contractors and small businesses in the UK that does nothing to encourage anyone with a family to pursue a new start up and grow it into a successful business. Everyone has to make their own decision on issues like this, and while some are happy income shifting others choose to play it safe.

S660 when it appears will be another IR35 disaster, it being difficult to prove and there will be more ugly test cases going through the courts before a "safe" method becomes apparent. "Safe" (in quotes) because as with IR35 each case will be tested on it's own merits and the income shifter will have something else to worry about that they will be caught, even though he/she is avoiding the legislation in the safest possible way.

To the OP: your accountant is not lying, but consider all accountants to be HMRC double agents. I've not spoken to one yet who cannot help spouting HMRC safe advice even though there maybe a more tax efficient route on one issue or another. Income shifting is another one of those choices that as a Ltd Co director you have to make for yourself.

[malvolio]

You can't retrospectively apply new legislation, which is what FBT will be. The really dodgy bit about the BN66 retrospection is their insistence they are not changing anything, merely re-applying existing legislation correctly.

Anyway, given the likely state of the parties by then, and the threat of a leadership-change induced election, I can't see them trying to bring out any really unpopular taxes in 2009. Even NL aren't that stupid.

[TheRefactornator]

You can't retrospectively apply new legislation, which is what FBT will be. The really dodgy bit about the BN66 retrospection is their insistence they are not changing anything, merely re-applying existing legislation correctly.

Anyway, given the likely state of the parties by then, and the threat of a leadership-change induced election, I can't see them trying to bring out any really unpopular taxes in 2009. Even NL aren't that stupid.

I agree it would be difficult to introduce this wholly retrospectively. The problem is that existing settlements legislation that was intended to prevent income shifting is obscure and this led to Arctic. There is nothing to stop the government introducing new legislation going forward and also introducing retrospective clarification on existing legislation in the same way as BN66.

As it stands April 2009 is the proposed date of the changes. It definitely won't be popular but when has that ever bothered this government before?

[blacjac]

If your husband is geninely doing work for the company then there are no issues with him owning a portion of the company.

This is not 'income shifting' and if your accountant does not recognise this then I would get a new accountant....

[PM-Junkie]

You can't retrospectively apply new legislation, which is what FBT will be.

...so all the uproar about the road tax changes has completely passed you by then?

[ASB]

You can't retrospectively apply new legislation, which is what FBT will be. The really dodgy bit about the BN66 retrospection is their insistence they are not changing anything, merely re-applying existing legislation correctly.

Anyway, given the likely state of the parties by then, and the threat of a leadership-change induced election, I can't see them trying to bring out any really unpopular taxes in 2009. Even NL aren't that stupid.

Actually the govenrment can produce retrospective legislation. Strictly it does it with the finance act every year.

It is only convention the means retrospective legislation is not usually produced. The only protection one has against it is since we signed up to the ECHR, this doesn't actually give the higher authoriity ability to strike it down though, only to order it to be struck down. The government of the day could then pass legislation to specifically ignore this (granted we'd be in a pretty deep crisis by then).

Granted retrospection doesn't generally happen, but that doesn't mean it can't.

[ASB]

...so all the uproar about the road tax changes has completely passed you by then?

There is no retropection whatsover in that. All they are doing is changing tax rates in the future based on a different criteria. It may, depending on ones views, be a spectacularly stupid piece of legislation but it is not retrospective.

[TykeMerc]

...so all the uproar about the road tax changes has completely passed you by then?

Not that I'm willing to defend HMG or their Vehicle Excise Duty changes, but they're not applying the changes retrospectively in the sense of expecting people to pay back tax for previous years. BN66 is truely retrospective and therefore unjust to me.

The VED changes aren't unjust, they don't appear terribly sensible but they've announced them in reasonable time and the changes will apply from a certain date.

Maybe it's just the way I see retrospection.