Mitigate Higher Rate Tax Liability

[tbrain]

The position on second shareholders has only been formally clarified for shareholders who are married to each other or are in civil partnerships. For unmarried couples, the line is that dividends paid to the second shareholder must represent their role in the business.

Interestingly, I asked my accountant about whether in reality this is the case, and their answer is that these rules are generally flouted...

[Bunk]

The position on second shareholders has only been formally clarified for shareholders who are married to each other or are in civil partnerships. For unmarried couples, the line is that dividends paid to the second shareholder must represent their role in the business.

Interestingly, I asked my accountant about whether in reality this is the case, and their answer is that these rules are generally flouted...

What role does a shareholder have in the business?

[tbrain]

Administrator, manages the books etc.

[Bunk]

Administrator, manages the books etc.

But those are duties for an employee, not a shareholder. A shareholder doesn't need to do anything to earn their dividend, they get it for owning the shares.

[TykeMerc]

But those are duties for an employee, not a shareholder. A shareholder doesn't need to do anything to earn their dividend, they get it for owning the shares.

Which makes perfect sense of course.
A shareholder is an investor either up front or to provide financial support, I agree that it makes no sense that they should have to provide material effort for the business. If they own shares then dividends are due irrespective of relationship.

Overly simplistic view of course.

[Ignis Fatuus]

Administrator, manages the books etc.

I'm a BP shareholder. Should I be managing their books?

[tbrain]

I completely agree with you guys.

Unfortunately, I imagine that HRMC will have a few things to say about me paying my unmarried other half 40 odd grand a year in order to mitigate HRT...

[Thejacka1]

I completely agree with you guys.

Unfortunately, I imagine that HRMC will have a few things to say about me paying my unmarried other half 40 odd grand a year in order to mitigate HRT...

You can pay straight out of the Company account into a SIPP and you won't get taxed on it, at least until you take it out. I believe the limit you can invest is coming down to £50K next year. You don't get any tax relief on Company contributions though.

It also has the advantage of making the money safe from IR35 investigations. The Govt is making several changes to Pensions savings to make it a lot more attractive and flexible to how it used to be.

If your partner is an employee, you can contribute to a separate SIPP or stakeholder pension from the company as well.

[Wanderer]

For unmarried couples, the line is that dividends paid to the second shareholder must represent their role in the business.

Maybe you are thinking of a salary paid to a "connected person" where you may need to demonstrate that they actually do some work for the company.

My understanding is that anyone can own shares in a company and receive dividends, they don't have to do anything for the company.

[TykeMerc]

Maybe you are thinking of a salary paid to a "connected person" where you may need to demonstrate that they actually do some work for the company.

My understanding is that anyone can own shares in a company and receive dividends, they don't have to do anything for the company.

That's pretty much how I see it, I have speculated on the benefits (advisability too come to that) of giving my sons some different class shares and declaring the odd special dividend. Mind you I'd have a hard time arguing it wasn't a cynical avoidance technique if challenged by Hector