Reply to: Dividend To Children As Shareholder(s)

[ASB]

If I were hmit I would take the view that the asset given to the child - scenario 3 - was nothing more that diverting income. I would take the view that it was reducing the need for parental support. As such it is a gift of income, which may be irrelevant, but there is also an implied retained interest. So caught.

But that view may not prevail.

if however you chose to gift a chunk of your share portfolio or a house then since that is not directly related to your income it would be different.

Further, it does sem possibly worth a shot. If it fails the income will be asessed to you and that would be the case otherwise anyway. Interest is the downer. And a possible penalty.

if the child has gone their own way in life then I dont really see any problem. The question is whether the child is dependant.

[FMCG]

(7)In this section and sections 631 and 632—

(b)“minor” means a person under the age of 18 years, and “minor child” is to be read accordingly, F3...


Much appreciated. Think this is the missing piece of information that I sought.

[TheCyclingProgrammer]

The definition of minor child is pretty clear in the legislation:
http://www.legislation.gov.uk/ukpga/2005/5/section/629

[FMCG]

Absolutely zero plan to take and use this money from the kids. Very much intended to be be theirs, to pay for University related expenses (accept it will include beer and probably as well as fees and living expenses).

Appreciate the links and accept that the <16 year old could land me with a tax liability if I go down this route whereas the >18 should not.

Guess the dilema I face - is the 16-18 year old a minor child, even though has own NI number ie not yet clear if 16 is the cut off limit or 18?

[northernladuk]

To elaborate on the above, settlements to a non-minor child are potentially caught by the normal "retains an interest" rule (s624) however shouldn't be a problem if you the giver does not retain any interest in the shares or generated income from those shares.

If the children are minors, then s624 is irrelevant; s629 is what applies and you can read all about that here:
TSEM4300 - Settlements legislation: settlement for unmarried minor child: settlements legislation
TSEM4310 - Settlements legislation: settlement for unmarried minor child: income less than £100

So that will only apply to a dwindling number of Yorkshire kids as they close t'pits down and increase the rate of unemployment in old mining towns.....

[TheCyclingProgrammer]

Thanks - that 2nd link is one that I previously read through. My dilemma is the break points for the age ranges.

Wanted to avoid trusts/etc and also resolve prior to the April 2016 dividend changes.

Going to see accountant later this week.

To elaborate on the above, settlements to a non-minor child are potentially caught by the normal "retains an interest" rule (s624) however shouldn't be a problem if you the giver does not retain any interest in the shares or generated income from those shares.

If the children are minors, then s624 is irrelevant; s629 is what applies and you can read all about that here:
TSEM4300 - Settlements legislation: settlement for unmarried minor child: settlements legislation
TSEM4310 - Settlements legislation: settlement for unmarried minor child: income less than £100

[TheCyclingProgrammer]

I was going to say what Jessica said - over 18 (or is it 18 and over?) should be fine so long as you retain no interest in the shares or the dividends - that means the shares and dividends should be theirs to do as they please and if its held in a trust you should have no interest in the trust - if you retain an interest then it would be caught by the settlements legislation and the dividends would be taxed as if they are yours.

The first two points are automatically caught by the settlements legislation due to the rules on minor children - their shares and subsequent dividends would be taxed on the settlor/giver (i.e. you) regardless of whether you retain an interest in them (I think there's an exemption for a small amount, £100 I think, but that's it).

[Jessica@WhiteFieldTax]

Off the top of my head, and without any further research:

1 and 2 fail as settlement on child of parents. The effect is that the income is taxed on the parents. This may or may not be an issue for you.

3 works, but subject to wider operation of settlement legislation which doesn't seem to be enforced by HMRC with any gusto at present, but don't rely on that.

E&OE

[northernladuk]

Thanks - that 2nd link is one that I previously read through. My dilemma is the break points for the age ranges.

Wanted to avoid trusts/etc and also resolve prior to the April 2016 dividend changes.

Going to see accountant later this week.

I'd be interested in his response so keep us updated.

[northernladuk]

And the first reply in that thread is from you, with a link to another thread!

Can't say I'm not consistent

[FMCG]

Thanks - that 2nd link is one that I previously read through. My dilemma is the break points for the age ranges.

Wanted to avoid trusts/etc and also resolve prior to the April 2016 dividend changes.

Going to see accountant later this week.

[jmo21]

Previous post on topic here

http://forums.contractoruk.com/accou...reholders.html

And the first reply in that thread is from you, with a link to another thread!

[northernladuk]

Previous post on topic here

http://forums.contractoruk.com/accou...reholders.html

[northernladuk]

What did your accountant say?

[SimonMac]

Trying to appreciate this item further as unsure even after the usual web trawl.

Can a Director distribute/pass/transfer over a portion of shares to their offspring (via using Companies House website). When process complete then declare a dividend using accepted protocol, pay via company cheque which is subsequently cashed by the child into their own account.

Would there be different tax implications depending on following scenario(s)

1. child between 14 and 16 ie under 16 years of age and at school in FTE with no NI number
2. child between 16 and 18 ie at college in FTE with own NI Number
3. child between 18 and 21 ie at university in FTE with own NI Number

Essentially, want to build up funds for them in their own account(s) in readiness for university ie not planning on taking this money from the child for myself.

Don't think children under 18 can be shareholders due to the voting rules that come with shares, you could set up a trust for them though to hold and manage the shares.

If your intention is to build up their uni fund rather than tax efficiency from the company, take them in your name and stick them in Junior ISA's in their name