likely cost....setting up alphabet shares

[eazy]

Arctic Systems

It all goes back to S660 & Arctic Systems case - It resolved around Ordinary shares & spousal tax excemptions. Ordinary shares being more than right to income.

This article discusses both Arctic Systems Ordinary share split and Patmore case (Alphabet Shares).
Pros and cons of dividends paid to spouses & civil partners

[Maslins]

My view - we too recommend against alphabet shares, as we feel it's asking for trouble. As others have suggested, I think a key part of the Arctic case was that the shares they each had were entirely equal.

Having said that, we have inherited a few clients from elsewhere who already had alphabet share structures. We haven't noticed any additional HMRC snooping on their affairs compared to others...but then reality is we have very few HMRC enquiries. Where we do it's typically either:
- personal tax, client forgot about some bits of income they had outside the company that HMRC knew about...or thought they'd cleared their student loan when they hadn't...so often HMRC are right in these ones.
- VAT, typically clients on FRS, especially those with overseas sales. Seems this confuses HMRC as to why FRS VAT isn't paid on some sales. HMRC generally wrong in these ones.

Really hoping the above isn't famous last words...

[WordIsBond]

If there is a business reason for alphabet shares, then there is no problem. Otherwise, presumably it could draw unwelcome scrutiny, since HMRC does have access to this information from Companies House.

For most cases of a one man band giving shares to a spouse, it would be hard to construct a business reason.

[ASB]

Hmrc had some guidance. Practioners guide to the settlements legislation. It has not been updated for a long time but probably gives useful insight.

a reasonable justification for alphabet shares may be due to multiple fee earners.

Waivers are another area. They are safer if they are not an enabler to pay higher dividends to those who do not waive. I.e. if the funds are available to pay their dividend to all shares there is less risk. Otherwise it is obviously a pre ordained scheme.

it is much simpler and less risky just to use ordinary shares. It may not provide the absolute max tax efficiency and flexibility but with a bit of forethought as to size of holdings etc it is pretty close.

[TheFaQQer]

With the upcoming dividend tax, the advice I received from one of the expert tax / IR35 defence / accounting companies was that they saw no issue with alphabet shares.

For anyone with a spouse already in the higher tax band, their advice was that you could issue an alphabet share and pay £5k dividend income tax free (assuming that the spouse has no other dividend income).

As others have said, dividend waivers are trouble - see Buck vs HMRC (might be HMRC vs Buck, but I'm out at the moment so that's from memory)

[Lance]

hi all
new here and have a question
my wife earns about 28k, is it worth me setting her up as a shareholder
someone mentioned to me this would need to be alphabet shares due to her job
does anyone know what the likely cost of setting this up may be and if it is worth doing
all my other accountancy things are set up just want ed a ballpark figure if possible

thanks for looking

I'm in almost exactly the same position. I did some maths, spoke to the accountant and we agreed to take a compromise.
Mrs. L. has 20% and I have 80%. It's not totally efficient every year as the numbers are different every year, but not ABC shares, no red-flag to Hector and no changing share allocation every quarter.

Oh and it's all change in a month anyway so all the maths are out of window (I did factor that in and why she has 20% not 30%

L.