LTD Company reorganization

[malvolio]

You say your other half is an IT professional that is currently not working.

Could she do some work for you (even part time) to justify the share ownership? Proof reading documents, a bit of admin, making phone calls...

The legislation is only to prevent people from gifting shares when there is no reason to do it other than to save tax. If your wife legitimately does some work for the business, then she can legitimately own some shares.


Howver, I am not a lawyer or an accountant..... .

Nor am I which is why I'm waiting to see what the final form of this "income shifting" rubbish actually is. Having read the proposal, it looks like anyone who has a legal partner who has shares in the business is going to get investigated. It's also worth noting that includes Geoff and Diana Jones of Arctic Systems, who were found by the HoL to be doing nothing illegal, and who now will be.

Good, fair, even-handed governemnt we have, innit...

[gadgetman]

Are they are planning to make this income-shifting legislation retrospective? Or is it not yet known?

[oracleslave]

Having read the proposal, it looks like anyone who has a legal partner who has shares in the business is going to get investigated.

Even if that partner is a revenue earner within the organisation?

[Ardesco]

Are they are planning to make this income-shifting legislation retrospective? Or is it not yet known?

Well they set a precident back in 2004 so thay could do if they wanted to, slimey bastards...

Wouldn't surpise me if they did just so that they could go back to Arctic Systems and take a wedge of cash from them while singing "Nyah Nyah Nyah Nyah Nyah".

About the mentality of the government atm it would seem....

[malvolio]

Are they are planning to make this income-shifting legislation retrospective? Or is it not yet known?

No it starts on April 6th, but worse than that, they will apparently be able to apply it to earnings based on income already in the company... Time for end-of-tax-year divivies everyone.

Even if that partner is a revenue earner within the organisation?

That's where it gets really scary. Their idea is to somehow quantify the extent of the contribution and apportion the tax liability to suit. So basically you'll have to keep accurate timesheets or something... and work out the market rate salary for the work in question to justify the income split. Of course if there is no tax advantage then nothing is payable - but you will still have had to go through the grinder to prove it.

Like I said, a complete dogs dinner, coming to a statute book near you very soon. Also, using their own numbers, it will realise about £250m a year - is it really worth it, you have to ask.

[SueEllen]

That's where it gets really scary. Their idea is to somehow quantify the extent of the contribution and apportion the tax liability to suit. So basically you'll have to keep accurate timesheets or something... and work out the market rate salary for the work in question to justify the income split. Of course if there is no tax advantage then nothing is payable - but you will still have had to go through the grinder to prove it.

And if your partner stops working for the company the year after but still has shares in the company then it would be considered income shifting.

Oh and not all the examples mention being married they include examples of partnerships and what people consider traditional family businesses i.e. father and adult children.

So it looks like HMRC are being given a law which they can use against anybody in a small business where there is more than one shareholder.

[ASB]

You say your other half is an IT professional that is currently not working.

Could she do some work for you (even part time) to justify the share ownership? Proof reading documents, a bit of admin, making phone calls...

The legislation is only to prevent people from gifting shares when there is no reason to do it other than to save tax. If your wife legitimately does some work for the business, then she can legitimately own some shares.


However, I am not a lawyer or an accountant..... .

I could be wrong but the legislation does not in any way control share ownership.

What the legislation does do is seek to the tax donor on the income the shares generated under certain circumstances. The OP can quite happily give/sell the shares to his partner. The only question is his tax position afterwards.

[sumo]

- building up cash in the company (i.e. not paying yourself everything that the company earns), so that you can smooth out the amount of tax you pay from year to year.

Could you give a bit more detail on how this helps? Do you just pay yourself the same dividends every year irrespective of actual company earnings?

[XLMonkey]

Could you give a bit more detail on how this helps? Do you just pay yourself the same dividends every year irrespective of actual company earnings?

Yes, basically that's it.

[malvolio]

I could be wrong but the legislation does not in any way control share ownership.

What the legislation does do is seek to the tax donor on the income the shares generated under certain circumstances. The OP can quite happily give/sell the shares to his partner. The only question is his tax position afterwards.

Excpet of course the whole point of Arctic was that such an arrangement is entirely legal and within the intent of the current tax law. And have you thought of the problem where you "give" 50% of your income to someone else but are taxed as though the whole amount was yours. Where does the money come from to pay the tax bill?