• Visitors can check out the Forum FAQ by clicking this link. You have to register before you can post: click the REGISTER link above to proceed. To start viewing messages, select the forum that you want to visit from the selection below. View our Forum Privacy Policy.
  • Want to receive the latest contracting news and advice straight to your inbox? Sign up to the ContractorUK newsletter here. Every sign up will also be entered into a draw to WIN £100 Amazon vouchers!

Income Shifting

Collapse
X
  •  
  • Filter
  • Time
  • Show
Clear All
new posts

    #21
    Originally posted by northernladuk View Post
    As I said, giving them to your wife for no other reason than to use tax breaks is not a business reason, no chance of contribution and she is not involved in the business so fails the test... so on borrowed time.
    Giving ordinary shares to your wife or civil partner is completely legal under the legislation as it currently stands - this is exactly what Arctic clarified.

    If the government were to legislate against this, then you're right, it's borrowed time. You only have to look at the proposed family business tax to see where it might go in the future, but that got shot down. However, anyone doing this at the moment is only on borrowed time to the same extent that we all are - if the government changed the legislation in the future.

    For settlements between man and wife / civil partner, they couldn't even retrospectively issue a "clarification" since the Lords clarified it perfectly.
    Best Forum Advisor 2014
    Work in the public sector? You can read my FAQ here
    Click here to get 15% off your first year's IPSE membership

    Comment


      #22
      Originally posted by TheFaQQer View Post
      Giving ordinary shares to your wife or civil partner is completely legal under the legislation as it currently stands - this is exactly what Arctic clarified.

      If the government were to legislate against this, then you're right, it's borrowed time. You only have to look at the proposed family business tax to see where it might go in the future, but that got shot down. However, anyone doing this at the moment is only on borrowed time to the same extent that we all are - if the government changed the legislation in the future.

      For settlements between man and wife / civil partner, they couldn't even retrospectively issue a "clarification" since the Lords clarified it perfectly.
      True I guess and looking at the reality although HMRC might not like it as it isn't in the spirit, the costs of trying to clarrify it will far exceed the actual returns if they can nail it.
      'CUK forum personality of 2011 - Winner - Yes really!!!!

      Comment


        #23
        Income Shifting

        What I don't get about all this is a man and wife or civil partner are legally shackled people, it is obviously a way to avoid family taxation whereas if the other person is an unmarried partner that connection is not so set in stone. So to my limited brain that's riskier and not so obviously a way to mitigate tax since the unmarried partner is freer to consider it as a separate pot and feck off with it!

        Comment


          #24
          Originally posted by northernladuk View Post
          I personally think anyone who has given shares to their wife purely to use her tax breaks is on borrowed time....
          Old-ish thread, but how do you define "purely to use her tax breaks"? If I feel my (unmarried) partner - who is unemployed and has no other earnings - is entitled to a share of my company's profits, so I sell her 25% of my shareholding (ordinary shares with all voting rights), and distribute dividends accordingly, with her dividends being paid directly to her to spend as she pleases (it essentially being her main form of income), is that acceptable?

          I've read the settlements legislation several times and read numerous mixed messages about this but I cannot see how the above arrangement would be considered a problem.

          Comment


            #25
            If you are unmarried then the arrangement would not be covered by the precedent set by previous court cases.

            If you wouldn't be giving her the shares to use her tax breaks, you could give her money out of your after-tax income?

            Craig

            Comment


              #26
              You are not married so this would fall under S660. have a look at the link to the right...

              But if you were for arguments sake...


              This is my personal opinion and has yet to be tested in law but your post gives the perfect example for me to use...

              f I feel my MARRIED partner - who is unemployed and has no other earnings - is entitled to a share of my company's profits, so I sell her 25% of my shareholding (ordinary shares with all voting rights), and distribute dividends accordingly, with her dividends being paid directly to her to spend as she pleases
              Yes, Arctic case has shown that this is quite acceptable and defendable and makes sense

              Can I give shares to my wife to use her tax breaks so I don't pay more tax on the dividends if I got them out. She isn't working now but will reverse the situation when she get's a job
              In my mind this shouldn't be acceptable. This option is just using your wife as a tax mule to avoid paying tax that is due in the short term and has no business application whatsoever. HMRC will be interested in changes of shareholdings for a reason and this is an example why. Again in my opinion this could meet the criteria for aggressive tax avoidance so could still fail in court. The Arctic case says you can give your wife a share in the business you run, I don't think it opens the door to use her as a tax mule.

              All in my opinion, easily circumvented by changing your approach to it (i.e. change the wording from the second to the first situation) so could still not be a problem but IMHO fundamentally different.

              Just put that down for theoretical argument and discussions sake rather than any firm fact with court evidence.
              Last edited by northernladuk; 22 August 2013, 14:47.
              'CUK forum personality of 2011 - Winner - Yes really!!!!

              Comment


                #27
                Originally posted by lukeredpath View Post
                Old-ish thread, but how do you define "purely to use her tax breaks"? If I feel my (unmarried) partner - who is unemployed and has no other earnings - is entitled to a share of my company's profits, so I sell her 25% of my shareholding (ordinary shares with all voting rights), and distribute dividends accordingly, with her dividends being paid directly to her to spend as she pleases (it essentially being her main form of income), is that acceptable?

                I've read the settlements legislation several times and read numerous mixed messages about this but I cannot see how the above arrangement would be considered a problem.
                It's not, provided it's your wife/husband. Quite apart from Arctic showing that man and wife can share company profits regardless of each person's level of input to the business, HMRC could only try to challenge an arrangement as being purely an avoidance measure if the shares were of a different class; for example, if they had no voting rights, or were routinely waived. As long as you have the same class of shares, there are no restrictions between spouses.

                What sometimes confuses people is getting that mixed up with salary. If you pay (S)he Who Must Be Obeyed a salary, the rate has to be somewhere close to market rate for the work done. If (s)he does no real work, divvies are the better option anyway.

                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.
                Last edited by malvolio; 22 August 2013, 14:48.
                Blog? What blog...?

                Comment


                  #28
                  Originally posted by Craig at Nixon Williams View Post
                  If you are unmarried then the arrangement would not be covered by the precedent set by previous court cases.
                  I realise that.

                  If you wouldn't be giving her the shares to use her tax breaks, you could give her money out of your after-tax income?
                  Which specific part of the settlements legislation says that she cannot own a 25% share in my company and receive dividends accordingly? All of this seems to hinge on whether or not I (or my spouse, if I had one) retain an "interest" in the the property. If the money goes to her, I have no say over what she does with it and she shares confer all the same rights as mine, how do I retain an interest?

                  Comment


                    #29
                    Originally posted by lukeredpath View Post
                    Which specific part of the settlements legislation says that she cannot own a 25% share in my company and receive dividends accordingly? All of this seems to hinge on whether or not I (or my spouse, if I had one) retain an "interest" in the the property. If the money goes to her, I have no say over what she does with it and she shares confer all the same rights as mine, how do I retain an interest?
                    S660 Income shifting. The link is in the bar at the right.
                    'CUK forum personality of 2011 - Winner - Yes really!!!!

                    Comment


                      #30
                      Originally posted by malvolio View Post
                      It's not. Quite apart from Arctic showing that man and wife can share company profits regardless of each person's level of input to the business, HMRC could only try to challenge an arrangement as being purely an avoidance measure if the shares were of a different class; for example, if they had no voting rights, or were routinely waived. As long as you have the same class of shares, there are no restrictions between spouses.
                      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.

                      * The dividends are paid directly to her
                      * I have no say over what she does with the money
                      * The shares are ordinary shares and she has full voting rights

                      So while the exemption for spouses is not relevant here, I don't see how the above arrangement is caught by settlement legislation in the first place.

                      Comment

                      Working...
                      X