Income Splitting If Not Married

**northernladuk** · 28 August 2012, 09:42

What is to discuss. Your accountant says no and you still think it is a good idea? Jesus.... Moving money around your family to reduce tax is clear tax avoidance and will end badly for you AND your family.

Put your money in to a pension, look in to business offeset mortgages, look for a higher rate business account seem to be the basic ones. You could try looking at getting the company to fund a car for you if you are happy to drive one at 110mg co2 or less.

Apart from that there are not many other options. We have been over this many times and no one has come up with anything yet. Trusts were discussed but they are listed on the HMRC's agressive tax avoidance list so that isn't really an option now.

Did you actually follow his advice and read the Arctic systems case then?

**DeludedAussie** · 28 August 2012, 09:45

Originally posted by northernladuk View Post

What is to discuss. Your accountant says no and you still think it is a good idea? Jesus.... Moving money around your family to reduce tax is clear tax avoidance and will end badly for you AND your family.

Put your money in to a pension, look in to business offeset mortgages, look for a higher rate business account seem to be the basic ones. You could try looking at getting the company to fund a car for you if you are happy to drive one at 110mg co2 or less.

Apart from that there are not many other options. We have been over this many times and no one has come up with anything yet. Trusts were discussed but they are listed on the HMRC's agressive tax avoidance list so that isn't really an option now.

Why is it tax avoidance if you move money between your family but if your wife is a shareholder who does nothing then this is fine??!!!!

My view is that this is structuring my affairs in a tax efficent way. I am a simple employee - My parents are shareholders of the company.

What exactly can HMRC challenge? Whilst we are on the subject of avoidance are you telling me that a 5K salary and 35K dividend is not tax avvoidance itself?

**northernladuk** · 28 August 2012, 09:48

Originally posted by DeludedAussie View Post

Why is it tax avoidance if you move money between your family but if your wife is a shareholder who does nothing then this is fine??!!!!

My view is that this is structuring my affairs in a tax efficent way. I am a simple employee - My parents are shareholders of the company.

What exactly can HMRC challenge? Whilst we are on the subject of avoidance are you telling me that a 5K salary and 35K dividend is not tax avvoidance itself?

I think the root of the problem is the fact you are a bit of an idiot to be honest.

You are using unrelated people to the business to artificually reduce your tax liability. That is not being efficient.. it is avoiding paying tax. Remember you will be giving your parents divis, ... who will then I expect eventually give it back to you... You as an employee will be taxed on everything as such and loads of other stuff it just isn't worth getting in to.

HMRC has been trying to tell you for bloody years that 35k divi and 5k salary is avoidance... Have you not been watching the IR35 carry on?

**northernladuk** · 28 August 2012, 09:56

You already mentioned this on the thread below and was told it wouldn't wash...

http://forums.contractoruk.com/accou...orp-tax-3.html

**Clare@InTouch** · 28 August 2012, 10:00

Originally posted by DeludedAussie View Post

Why is it tax avoidance if you move money between your family but if your wife is a shareholder who does nothing then this is fine??!!!!

My view is that this is structuring my affairs in a tax efficent way. I am a simple employee - My parents are shareholders of the company.

What exactly can HMRC challenge? Whilst we are on the subject of avoidance are you telling me that a 5K salary and 35K dividend is not tax avvoidance itself?

The point of your accountant referring you to Arctic Systems is presumably to point out the fact that the Jones' were OK because they were married, but that such treatment does not apply to other connected parties. It's the marriage bit that's important.

**northernladuk** · 28 August 2012, 10:01

I don't know what came of this but this was looked at in 2008 and and there is a comment in there you need to be aware of...

In December 2007, the government published draft legislation "focused specifically on income shifting arrangements that make use of companies or partnerships to gain a tax advantage."

Draft legislation stated the new rules would not apply if there was a "genuine commercial arrangement" and HMRC believes tax reduction was "not the main or one of the main purposes" of the arrangement.

Otherwise the rules, which are under consultation at the time of writing, will apply where one person 'shifts' trade or business income to another, with the effect being that less income tax is paid.

I believe your idea doesn't pass this rule so will fall firmly in to tax avoidance.

**Greg@CapitalCity** · 28 August 2012, 10:09

Originally posted by DeludedAussie View Post

Am I able to start a limited company in my parents name (both of whom are retired) with them as shareholders and me as a simple employee of the company and put future money through the new company?

I think what you mean is your parents start a company, and employ you. Nothing wrong with that. If you work using an agency they may get a bit confused to see a retired person signing service contracts with them, but you may be able to work around that issue OK.

The problem I see is, whats the point?? As an employee you will pay the usual employment taxes of PAYE/NI. Are you thinking that your parents will pay themselves dividends from their company, and then gift them to you?? If this is right, then from this point onwards, I think you idea starts to lose traction.

**ecc83** · 28 August 2012, 10:10

Originally posted by DeludedAussie View Post

Why is it tax avoidance if you move money between your family but if your wife is a shareholder who does nothing then this is fine??!!!!

I thought if your wife didn't have some demonstrable role in the company, then that was purely avoidance also?

**northernladuk** · 28 August 2012, 10:15

Originally posted by ecc83 View Post

I thought if your wife didn't have some demonstrable role in the company, then that was purely avoidance also?

If you pay her the minimum wage she has to earn it. Paying someone 5-8k just for 'book keeping' is not going to wash in an investigation. I would argue 90% of these setups involve paying the spouse over the odds for work she isn't doing but it is allowable if she can demonstrate she earns it.

She is also allowed to be a shareholder. I am a shareholder in BT but I don't do anything for the company.

It is a grey area though. Some accounants say don't do it (risk and the fact you might split up), others say 70/30 split to show you are still main earner and others will just gung ho and go for 50/50. I guess at end of the day it's your attitude to risk.

The S660 threads in the links to the right go through it in more detail.

Income Splitting If Not Married