Limited Company - Income Splitting yes or no?

[Wanderer]

Q. From a tax/legal perspective, if I were to give/sell Mrs C a share and paid her half the divvies, what would be the difference between that dividend income and the dividend income she recieves from her Barclays shares [say]

Anyone can buy shares in Barclays and get a dividend. Not everyone can buy a share in your company and take a cut of your profits. Also, your wife is considered to be a "connected person".

[Maslins]

Anyone can buy shares in Barclays and get a dividend. Not everyone can buy a share in your company and take a cut of your profits. Also, your wife is considered to be a "connected person".

On top of that, you're probably looking to sell a share to your wife for a quid that entitles her to 50% of £30k-100k+ profit/year. Sadly you don't tend to get that kinda return on investment on the stock exchange, and in turn you wouldn't sell a 50% share in your company for that price to an independent third party.

[biggles_1]

So what if you're not married

I am one of those heathens living out of wedlock.

2 kids for her to look after at home now and we're trying to calculate the going back to work or housemum/doing my invoices and paperwork while they're at nursery idea.

What difference does the not being married thing make with regards to the sale of 50% of shares and/or the payment of dividends?

J.

[malvolio]

If you're not married (or not in some equivalent, formal civil partnership), S660 doesn't apply. End of.

[biggles_1]

So there's less of a problem

So as we're not married there is even less of an issue?

She can have half the shares and half the dividends and it's not a problem?

I'll pay her the minimum for her time for the work itself.

Cheers for the speedy response beforehand.

J.

[Hex]

So as we're not married there is even less of an issue?

She can have half the shares and half the dividends and it's not a problem?

I'll pay her the minimum for her time for the work itself.

Cheers for the speedy response beforehand.

J.

The catch is that you can only gift the shares tax free if she's your spouse. If she's not your spouse there'll be tax implications in transferring the shares of an existing company.

[biggles_1]

But she could buy them.

How would they value them?

I paid £1 per share a year ago.

J.

[Sausage Surprise]

The catch is that you can only gift the shares tax free if she's your spouse. If she's not your spouse there'll be tax implications in transferring the shares of an existing company.

I'm in the same boat (being not married) and the "missus" is a joint shareholder. What tax implications are there?

[Wanderer]

So is there a big differerence between selling/gifting a 50% share in a company to someone as opposed to forming a company where that someone is a joint shareholder from the company creation?

If a person was the sole shareholder of a LTD then would it be better to cease trading and form a new company with equal shares issues at company formation time?

If a company has two shareholders since it was formed, then does that mean that dividends have to be paid equally to both shareholders?

[GreenerGrass]

Normally dividends are paid based on the number of shares allocated to each person, it doesn't have to be a 50/50 split. If your wife earns a lowish salary you might only want to to give her 20% of the company shares that would take her up close to the start of the 40% income tax band based on your typical company annual profit.

Maybe if your company started with only 2 shares you might have a problem. But most have 10 or a 100, so easy to split share allocations in 10% chunks.