income shifting - on ice

[Archangel]

My accountant ells me that I can't take advantage because I'm not married

New accountant time.

The process goes like this:

Sell some shares to other person (or issue a different class of share to them)

Pay dividends equally based on share ownership.

HMRC may not like this, but it is legal.

If you are married, you can gift your spouse (or legal partner) the shares instead.

Get advice from another accountant (as I am not one, and yours seems a bit dim)

[THEPUMA]

There is more to this query than meets the eye.

In the Arctic Systems case, the exemption which one the case for the Joneses in the House of Lords is only available to married couples and civil partners. This is presumably why your accountant thinks you are unable to pay dividends to your partner.

However, it is unlikely that a case would have been taken against the Joneses had they been unmarried.

This is because the settlements legislation can not normally be applied to unmarried partners where dividends are paid into the sole account of the non-fee generating partner. Whereas, payments to a spouse are automatically deemed to be of benefit to the other spouse.

So in summary, your accountant is half right but has reached the wrong conclusion.

Just1morethan, on the other hand, is a buffoon.

PUMA

[londonjames]

If the 'partner' as such was a non working relative such as a brother or parent would that also be fine?

Aren't the restrictions on gifts as long as the person survives 7 years you can pass the money back tax free. Obviously realise this only works if you all get on and the old don't mix business and stuff/etc

[THEPUMA]

If the 'partner' as such was a non working relative such as a brother or parent would that also be fine?

Aren't the restrictions on gifts as long as the person survives 7 years you can pass the money back tax free. Obviously realise this only works if you all get on and the old don't mix business and stuff/etc

From an IHT perspective you are correct but reading between the lines the circularity you are suggesting would be a problem. This is the issue with spouses ie that the money is deemed to have been returned to them. A partner is fine because they can finance their share of joint household expenses with the cash but a brother or sister would have to return the cash to you somehow and that would scupper the deal.

[londonjames]

If you could survice without the money for a few years and then they were to return it to you as a 'gift' would this not suffice.

I see your point though it just depends who much they look into what happens to the money. As another example you could set up some form of joint mortgage or offset and put the money there which would indirectly benefit you.

Then again wait until a tory government or for the downturn to continue and they won't change anything!

[THEPUMA]

If you could survice without the money for a few years and then they were to return it to you as a 'gift' would this not suffice.

I see your point though it just depends who much they look into what happens to the money. As another example you could set up some form of joint mortgage or offset and put the money there which would indirectly benefit you.

Then again wait until a tory government or for the downturn to continue and they won't change anything!

What you are describing is just smoke and mirrors. It probably works because they won't find you but it is not robust and would probably be classified as tax evasion rather than tax avoidance.

Playing devil's advocate, if I were a tax inspector who happened to be scrutinising your affairs I probably wouldn't be able to understand the commercial justification/logic behind that structure and that may prompt me to dig a little deeper. Then it would depend how well you had covered your tracks.

But the honest truth is it is very unlikely anyone ever would review your situation.

You should bear in mind however, the new penalty regime which is much more punitive than we have been used to.

For clarity, I am not suggesting that tax fraud is a good idea just because you are likely to get away with it!

[londonjames]

Thing is I agree it all depends on the viewpoint.

Who is to say that a mother/father/sibling is any different from a partner with regards what they input into a business or save the main income generator time wise. Currently isn't it all legal but I do see your point especially with the new penalty regime.

Back to the drawing board!

[Hiram King Of Tyre]

My accountant is qute active on this site so hopefully they'll comment.....

[THEPUMA]

Just1morethan, on the other hand, is a buffoon.

Come on Just1morethan you can't take that lying down. Are you a man or a mouse? I am waiting to be crushed like a cock-a-roach.

[Alan @ BroomeAffinity]

I've got better things to do than get involved in a slanging match with someone who is clearly as arrogant as you are.