Income Shifting

[TheCyclingProgrammer]

S660 Income shifting. The link is in the bar at the right.

Read it all mate and spent a long time on Google and this site looking at much information as possible.

My impression was that as a result of the Arctic case, s660 was effectively dead and HMRC were relying on settlements legislation (s624) to pursue cases.

[TheCyclingProgrammer]

That said, unmarried partners aren't connected persons so S660 doesn't apply anyway. So what you propose is entirely valid, provided the shares were paid for.

They were, and the issue of the share transfer were dealt with correctly with advice from my accountant pertaining to any CGT issues.

That said, in my numerous searches on this forum, you are the only person I have seen who has said this in any definitive way. I've read opinions from numerous others (including various accounting firm representatives) stating that if you're not married, you're on dodgy ground.

Indeed, northernladuk says as much a few posts above. I don't post much on here, but I've lurked for long enough to realise you are both frequent and respected contributors on here, so why the difference of opinion?

When you say "S660 doesn't apply", do you also mean s624 of ITTOIA doesn't apply either?

[northernladuk]

Read it all mate and spent a long time on Google and this site looking at much information as possible.

My impression was that as a result of the Arctic case, s660 was effectively dead and HMRC were relying on settlements legislation (s624) to pursue cases.

True but if you do treat it as a purely commercial arrangement and are as clean as a whistle and document everything without a sniff of preferential treatment it should be ok I guess. Can't believe HMRC won't want a look at the situation though.

I was stuck thinking you were married and is in a thread titled income shifting which you clearly said you weren't sorry. New thread might have been in order to get away from the income shifting slant this one has. My bad.

[TheCyclingProgrammer]

True but if you do treat it as a purely commercial arrangement and are as clean as a whistle and document everything without a sniff of preferential treatment it should be ok I guess. Can't believe HMRC won't want a look at the situation though.

I was stuck thinking you were married which you clearly said you weren't sorry.

No problem. I know this stuff has been discussed to death on here but I've still not been able to establish any common consensus. The vast majority of threads I've read seem more concerned with spouses which does seem to be well-trodden ground with a much clearer picture after the Arctic case. Other threads seem to be discussing more blatant tax dodges (complex schemes involving family members and so on) which aren't what I'm interested here.

I'm by no means trying to divert profit through my spouse purely to take advantage of her tax allowances, only to have the money make its way back to me. As far as I'm concerned, the money is hers.

We are engaged, so I have no idea how the situation changes once we are married (do things become more clear cut at that point?).

[TheCyclingProgrammer]

I was stuck thinking you were married and is in a thread titled income shifting which you clearly said you weren't sorry. New thread might have been in order to get away from the income shifting slant this one has. My bad.

Perhaps...I suppose I misunderstood the term "income shifting" and thought it applied to our arrangement too.

My partner is a stay-at-home Mum so her returning to work isn't on the cards for the foreseeable future. Our shares arrangement just seemed like a reasonable way to provide her with some income and take advantage of the retained profit that has built up in the company.

Does anything change if, for instance, we decided to buy a house together and she chose to use a dividend payment to put towards the deposit on the house?

[northernladuk]

Perhaps...I suppose I misunderstood the term "income shifting" and thought it applied to our arrangement too.

To be honest I am utterly confused now Need to re-read the thread and take concentrate a bit more. Serves me right trying to post on a busy day. Hopefully Mal will come back and put me right where he needs to. I fail.

[Craig at Nixon Williams]

Let me re-iterate, I'm not talking about married partners. My partner and I are *not* married. She paid for her 25% share in my company and receives dividends accordingly.

You are opening up a different can of worms here...how are you going to determine how much a share in your company is worth?

Craig

[TheCyclingProgrammer]

You are opening up a different can of worms here...how are you going to determine how much a share in your company is worth?

Craig

My accountant's advice was to simply charge her what I paid for them, so £1 a share.

[TheCyclingProgrammer]

On a more pragmatic level, who have HMRC actually investigated with regards to income shifting and/or settlements legislation in recent years, and won? Is this actually all worrying over nothing?

[Craig at Nixon Williams]

My accountant's advice was to simply charge her what I paid for them, so £1 a share.

Company valuation for unquoted shares is far more complicated than that!

If you were to invest £1 in a company - how much would you expect to receive in dividends in a year?

If somebody who you were completely unrelated to (a complete third party) invested £1 in your company would you want to give them 25% of your income?

Craig