Paying family members dividends from my limited company..

[aubergine]

Hi

Are there any issues with enlisting a family member - my mother for example - as a shareholder in my limited company, and paying them yearly dividends?

What about if the same family member makes cash gifts or loans to me personally?

Even though the arrangements are entirely separate, would the revenue be of the same view?

Thanks

Edit:

What if my mother were to be employed, rather than listed as a shareholder, does that change the situation?

[northernladuk]

You have a number of things to look at first...

1) Look at the guides to the right, particularly the newbie guides and the S660 link. Read up on the Arctic case which will give you your answer

2) You could try searching the forums as this has been asked ad-infinitum. You can find out how to search here http://forums.contractoruk.com/welco...uk-forums.html

3) Seach google for S660/Arctic/Income shifting

4) Search google for agressive tax avoidance and see what the HMRC think is agressive tax avoidance, particularly the bit about doing something that is not required for the business to lower tax burden

5) Apply a bit of common sense. You pay your mother a dividend and she gifts it back to you. I think you can work that out can't you?

6) Read up about dividends, focussing on when they can be issued. I think it would be wise to fully understand them before entering into any tax avoidance scams.

7) Speak to your accountant.

8) Google 'Ramsay Principle'

and if you do decided to embark on this scheme

9) Buy a Rabbits foot, sprig of heather, 4 leaf clover, cross everything you have and pray to whatever god you worship that you never get investigated.

[BrilloPad]

5) Apply a bit of common sense. You pay your mother a dividend and she gifts it back to you. I think you can work that out can't you?

I used to do it all the time - though admittedly it was pre 1994. Have the rules changed?

[aubergine]

Apologies, I did search but didn't find anything immediately useful

I'll have a look through the links, though I'm guessing the answer is 'forget it'!

Cheers.

[northernladuk]

I used to do it all the time - though admittedly it was pre 1994. Have the rules changed?

What? Apply some common sense? I don't think the laws around using common sense have changed since 1994 but there definitely seems to be a decline in its use.

[aubergine]

What if my mother were to be employed, rather than listed as a shareholder, does that change the situation?

[Project Monkey]

Are there any issues with enlisting a family member - my mother for example - as a shareholder in my limited company, and paying them yearly dividends? Yes.

What about if the same family member makes cash gifts or loans to me personally? You should declare any personal income.

Even though the arrangements are entirely separate, would the revenue be of the same view? Probably not.

[Project Monkey]

What if my mother were to be employed, rather than listed as a shareholder, does that change the situation?

No problem provided the company pays relevant PAYE & NI and you declare the personal income if she hands the cash back to you
.

[northernladuk]

No problem provided the company pays relevant PAYE & NI and you declare the personal income if she hands the cash back to you
.

Unless it is an artificial situation to avoid tax which it clearly is from the approach to this situation.

You can only pay your mother FOR THE WORK SHE DOES. Just paying her for nothing to avoid tax is also gonna land you in hot water.

Just run your affairs properly and stop trying to make up schemes to avoid tax.

[Project Monkey]

and there may be a rule about the amount you pay being proportionate to the work done.