Adding a shareholder and paying them dividends

[acted]

I am a contractor that pays dividends until the higher tax rate threshold while paying myself a min salary. I have more money in the company thats building up.

I would like to make my father a shareholder of my company and pay him dividends until he reachs the higher tax rate threshold.

Therefore, this will mean I can extract more cash from the company while paying no higher rate tax. Is this possible?

Can I add anyone as a shareholder and start paying them dividends from retained profit?

[Robot]

I am a contractor that pays dividends until the higher tax rate threshold while paying myself a min salary. I have more money in the company thats building up.

I would like to make my father a shareholder of my company and pay him dividends until he reachs the higher tax rate threshold.

Therefore, this will mean I can extract more cash from the company while paying no higher rate tax. Is this possible?

Can I add anyone as a shareholder and start paying them dividends from retained profit?

What value will you place on the shares that you will sell to your father?

A £1 or £10 or £100 or £1000 then you may find HMRC very interested in this transaction, as whatever value you place on them your Father will get a super return on his investment.

Furthermore, as your Father owns the shares, he is entitled to keep all the dividends he receives.

[acted]

I dont know what value to place on the shares.

I confident I will get the money back. Once in his hands he can gift it back to me.

The point of the question is can you do this? has anyone does this? Whats stopping anyone from doing this?

Is it not the same concept as having a wife and using her to distribute profits. The only problem is I am not married!

[TheFaQQer]

I dont know what value to place on the shares.

I confident I will get the money back. Once in his hands he can gift it back to me.

The point of the question is can you do this? has anyone does this? Whats stopping anyone from doing this?

Is it not the same concept as having a wife and using her to distribute profits. The only problem is I am not married!

You'd need to have some kind of valuation on the shares, I believe. Even if you give them away, they need a nominal value for calculating any capital gain on them.

There is a limit on how much money can be given as a tax free gift - over that limit, you need to declare it as income and pay tax on it. The difference is that between man and wife, that doesn't apply, so it's not the same concept.

And if the person you give the shares to dies, then they become part of their estate, which means that they need to be valued at that point to determine what part of their estate it becomes.

[Craig@Clarity]

I dont know what value to place on the shares.

I confident I will get the money back. Once in his hands he can gift it back to me.

The point of the question is can you do this? has anyone does this? Whats stopping anyone from doing this?

Is it not the same concept as having a wife and using her to distribute profits. The only problem is I am not married!

You can do this but you should get a valuation on the shares for your father to purchase them. That way, he is investing into the company rather you using his basic rate allowance to pay less tax. As The Faqqer, it's different for a husband and wife, since paying dividends to spouse is exempt from a legislation called s660. If you were married and you incorporated the company with your wife as a shareholder, you can do what you are proposing without dividends being reclassified as yours.

If you are simply paying dividends to your father to use up his basic rate tax allowance, if HMRC investigate, they could reclassify the dividends as yours, which means if it pushes you into higher rate tax, you will have to pay the additional liability plus potential interest.