Income shifting - Is this still a problem?

[psychocandy]

Couple of things. Generally speaking, unless there are special circumstances, PILON payments up to £30k can safely be regarded as Tax Free. There is no need to account for them as taxable income. (This is according to the solicitor I used to negotiate my own redundancy agreement a few months back).

You can always issue an additional share to your other half (as a gift) to change the shareholdings to a 50/50 split. Perfectly legal provided you fill out the right forms and inform Companies house.

Arent you thinking of redundancy payments being tax free?

I left under a compromise agreement which gave me 3 months PILON plus an ex-gratia payment. If I remember correctly, the PILON was taxed as normal but the ex-gratia was not.

[psychocandy]

Couple of things. Generally speaking, unless there are special circumstances, PILON payments up to £30k can safely be regarded as Tax Free. There is no need to account for them as taxable income. (This is according to the solicitor I used to negotiate my own redundancy agreement a few months back).

You can always issue an additional share to your other half (as a gift) to change the shareholdings to a 50/50 split. Perfectly legal provided you fill out the right forms and inform Companies house.

FFS. Not only am I going to end up having to pay this fella almost 3 months money (i.e. £106) for doing next to nothing, it now looks like half the stuff he told me was plain wrong. And I've got the hassle of sorting it out myself and wasting time (like now) trying to get to the bottom of it.

Saying that I've only paid one month manual payment so far. He cant even arrange for a correct DD form to be send to me. Maybe I should just cancel and hope he dont bill me!

[DaveB]

Arent you thinking of redundancy payments being tax free?

I left under a compromise agreement which gave me 3 months PILON plus an ex-gratia payment. If I remember correctly, the PILON was taxed as normal but the ex-gratia was not.

Nope. This is Pay In Lieu of Notice. The ex-gratia payment would have been in lieu of statutory redundancy.

Lots about it here as a quick reference.

http://www.accountingweb.co.uk/item/168022

As I said, I used a Solicitor, not an accountant, to negotiate the terms for me as they understand the law around redundancy specifically not just the tax laws. ( paid for by my ex-employer to boot )

[psychocandy]

Nope. This is Pay In Lieu of Notice. The ex-gratia payment would have been in lieu of statutory redundancy.

Lots about it here as a quick reference.

http://www.accountingweb.co.uk/item/168022

As I said, I used a Solicitor, not an accountant, to negotiate the terms for me as they understand the law around redundancy specifically not just the tax laws. ( paid for by my ex-employer to boot )

I;ll have to check this but if I remember rightly there was a big discussion at the time within the company about what was taxable and was not. Something to do with setting precedents etc.

I think the company in the end went to HMRC and then told all of us who were taking voluntary redundancy what would be happening? In the end, I did get taxed on the 3 months pay.

[DaveB]

I;ll have to check this but if I remember rightly there was a big discussion at the time within the company about what was taxable and was not. Something to do with setting precedents etc.

I think the company in the end went to HMRC and then told all of us who were taking voluntary redundancy what would be happening? In the end, I did get taxed on the 3 months pay.

There is your problem right there.

Did they not tell you you had to get the compromise agreement counter signed by a solicitor? That's a legal requirement on their behalf.

http://www.reculversolicitors.co.uk/...s/employer.htm

Final paragraph.

[northernladuk]

LOL. What about if all you've got is a joint bank account? Is that acceptable? Or is it better if she sets up her own account?

After all, theres no reason why she cant just bung it straight into joint account after recieving it, is there?

The problem is here we are exploiting a loophole in the system that wasn't designed for us hence the gove trying to constantly close them. It wasn't designed for us hence all the grey areas. Because of this you have to think about what your actions look like and do they break the 'spirit' of that law and what it is meant to protect.

You can give divi's to share holders. That bit is black and white and totally acceptable. To give divis to someone who then puts it back in your pocket with the sole intention of avoiding paying tax is not.

It is the same with the Directors loan. The rules are that you can give yourself a 5k loan and there is no penalty if you pay it back in a certain time frame. What you cannot do is then keep taking it out and paying it back. This is a scheme to keep yourself 5K ahead without paying the tax on it and is not allowed.

Understanding the reason behind the rule will often help explain what flexibility you have when applying that rule. I also believe the 24 month rule is another good example. We argue about the wording of it but forget what the rule was really put in place to do.

[psychocandy]

There is your problem right there.

Did they not tell you you had to get the compromise agreement counter signed by a solicitor? That's a legal requirement on their behalf.

Reculver Employment Law Solicitors | Redundancy, Severance and Compromise Agreement advice | Central London EC1, EC2, EC3, EC4, the City

Final paragraph.

Was all done properly via a solicitor. I dot have the agreement or tax details to hand at the moment so I'm just trying to rack my brains.

[philip@wellwoodhoyle]

TWe argue about the wording of it but forget what the rule was really put in place to do.

Unfortunately, that's the way the courts have taken us. Far too often, a court will make a decision based only on the words used and completely ignore the context and initial Parliamentary intention. Worst still, jumped up officials within HMRC and other public bodies take the literal wording to extremes. Like the way some local authority officials decide that a sandwich wrapper eaten at someone's desk is trade waste - that was never the intention of the law, but the actual wording of the law makes it possible and it's far too costly for someone to take it to the courts to get a proper decision made.

Funny though, that they only do it when it suits them. When Joe Public wants to take advantage of sloppy wording or a loophole, those same officials then claim that the wording doesn't matter and that it's the overall intention/nature of the law that matters.

They really do want their cake and eat it.

[xoggoth]

I could never do this as missus was always close to or above higher rate threshold. I realise now I should have converted to Islam or Mormonism and imported a few cheap Russian brides.

[Greg@CapitalCity]

I have heard this before. Do you have a reference why this is important? FWIW, me and Mrs Bloggs have always done this since Mrs Bloggs has been a shareholder since he Ltd Co was started up. However, it was by chance rather than planning that her divis ended up in her account rather than the joint account where my divis end up.

No reference I am afraid. We get external specialist tax updates and advice from time to time on these sorts of the things, and the 'outright gift' part was reinforced as important. Also keep in mind the shares can't be a right to income (so the wife's shares must carry the same voting rights etc as yours).