Register of members & share ledger

[DirtyDog]

What's all this about "justifying" the share? No justification is needed. A bounteous arrangement, as such, creates the settlement. This in itself is not enough to be "caught". The legislation couldn't be clearer about that.

Put it this way, the less connected you are to the receiver of the shares, the harder it would be for HMRC to claim the settlor has retained an interest, so long as the transfer was unconditional.

I could, if I wanted, choose a random stranger and give them a share in my company. Ordinary shares, no strings attached. I'll never see those shares, or the resulting dividends again. It's clearly a settlement as it's not an at arms length, commercial transaction. But there is not a chance that HMRC could contrive to tax those dividends on me, the settlor.

Giving 30% of the company (and I'm making an assumption based on the posts in this thread that the company was not valued or sold to the girlfriend), then paying the dividends monthly into a joint account, makes it a lot harder to argue that this an artificial attempt to avoid paying tax.

It would be a hell of a fight, and one I'm not convinced that the average poster is equipped to win.

[DirtyDog]

I look forward to an HMRC test case on income splitting between unmarried partners; it would be great to have some definitive case law on the matter so everybody can stop speculating and coming up with their own interpretations of the law. At least people would really know where they stand.

I suspect I'll be waiting a long time though...

Ideally, we need two test cases. One where the shares were a gift without any consideration, and one where the shares were sold based on a valuation - there's a big difference between the two.

Then you'd also probably want a couple where the shares were a gift and the recipient doesn't contribute much to the company, and one where they contribute a reasonable amount to the company...

Or just significantly simplified legislation.