Reallocating Shares - Red Flag for HMRC S660??

[Fandango]

When i started contracting 4 years ago my missus was a 25% shareholder in the Ltd company,however since then we've had a kid and shes dropped down to working part time and so her income from her full time job has dropped.

I've therefore been thinking or reallocating some of my Shares to her so that we can efficiently take more money from the company. I've calculated a 60/40% split would yield the best results.

I'm aware of S660, but is this reallcoation of shares likely to cause a red flag at HMRC??

With obvioulsy working parttime, we could justify that more time is now being dedicated to help run the business so as to justify the increase in shares.

Also if say the optimum share ratio was something like 38%/62%, do people do that or again is it more likely to flag up suspicions?

Thoughts/ any experience?

Cheers

[malvolio]

When i started contracting 4 years ago my missus was a 25% shareholder in the Ltd company,however since then we've had a kid and shes dropped down to working part time and so her income from her full time job has dropped.

I've therefore been thinking or reallocating some of my Shares to her so that we can efficiently take more money from the company. I've calculated a 60/40% split would yield the best results.

I'm aware of S660, but is this reallcoation of shares likely to cause a red flag at HMRC??

With obvioulsy working parttime, we could justify that more time is now being dedicated to help run the business so as to justify the increase in shares.

Also if say the optimum share ratio was something like 38%/62%, do people do that or again is it more likely to flag up suspicions?

Thoughts/ any experience?

Cheers

Distributing shares between spouses providing they are in the same class is perfectly legal and acceptable: PCG spent close to half a million quid demonstrating that point. So wave as many red flags as you like, HMRC can't do a hell of a lot about it.

[northernladuk]

Shares are not linked to the work you do for the company though. I have shares in BT and I don't do squat for them. You don't have to justify the change in shares to the time spent working for the LTD.

Obviously if you are paying her then it does but remember that dedicating time to the company does not mean she is doing more work for which she gets paid. I would guess however I have just wasted two lines of typing as you mentioned she was employed so over threshold anyway, even part time.

Mal, did the PCG go in to the issue of gifting the shares or her showing that she has put some value in to the company to recieve them?

[malvolio]

Mal, did the PCG go in to the issue of gifting the shares or her showing that she has put some value in to the company to recieve them?

As I recall it makes no difference. Husband and wife can share in the profits of either's efforts.

[Fandango]

that's great, thanks very much gents

So following on from that then would there be any issue in adding my son (2.5 years old) as a shareholder to the company, again in order to be able to draw more dividends from the company?

and if so would new shares be required or could i just reallocate our existing 100 shares between the 3of us into the optimum ratios?

Cheers

[psychocandy]

that's great, thanks very much gents

So following on from that then would there be any issue in adding my son (2.5 years old) as a shareholder to the company, again in order to be able to draw more dividends from the company?

and if so would new shares be required or could i just reallocate our existing 100 shares between the 3of us into the optimum ratios?

Cheers

Would be good if you could do that I guess. Could even make the cat a shareholder... :-)

I dont think you can do that - surely everyone would be doing it.... LOL

[malvolio]

that's great, thanks very much gents

So following on from that then would there be any issue in adding my son (2.5 years old) as a shareholder to the company, again in order to be able to draw more dividends from the company?

and if so would new shares be required or could i just reallocate our existing 100 shares between the 3of us into the optimum ratios?

Cheers

Jeez... Which bit of "spouses can share" did you not understand? Your son, or any other family member is explicitly excluded under the "connected persons" rule of S660. A little bit of research will show that S660 exists because Jack Hawkins did exactly what you propose in the 40s.

And you wonder why we spend so much effort defending ourselves from accusations of being money-grabbing tax cheats. Unless you're a total numpty you're already earning at least three times the national average. Stop taking the p!ss.

[northernladuk]

that's great, thanks very much gents

So following on from that then would there be any issue in adding my son (2.5 years old) as a shareholder to the company, again in order to be able to draw more dividends from the company?

and if so would new shares be required or could i just reallocate our existing 100 shares between the 3of us into the optimum ratios?

Cheers

You were doing so well until then...

[Fandango]

I'll leave it at that then

[psychocandy]

What if I marry my cat?