Reply to: URGENT HELP!! Divi before 6th or wait for correct advice on ER?

[WordIsBond]

Interesting seems I have not factored in the £11,100 CGT allowance, so is the ER difference really that relevant?

I could gift my wife 50% of the shares as she has 11k available this year before the higher rate. So up to 10k Divi each before, 5k each after, and then wind up as capital with an 11.1k allowance each??

I suspect to gift your wife shares just before closing the company would be seen as active avoidance outside the intent of the law and could invite scrutiny. I wouldn't do it, personally.

Whether ER or getting your closing amount below £25K, you still get the CGT allowance. The question is if it is capital gains or dividends, and that applies either way. I strongly suspect, but cannot prove, that if you are below £25K you are much less likely to be challenged on it. There probably just isn't enough money in it for them to pursue it unless it is absolutely 100% that someone is just trying it on. Making your wife a shareholder now might be seen, if they ever look at your case, as doing just that, of course. I suppose you could give her shares now and not take a big dividend, just take £5K each next year and again next April, then close down, and they might not look askance at that. And if you've been out of the game for a year, you say, "Well, I waited until it was clear I wasn't going back to contracting, then closed it." Hard to blame that on tax planning, and hard for them to say anything about giving shares to your wife a year before you close down.

I'm speculating. There are clearly some risks here. There are things you could do that increase them. Taking less than £25K as capital gains may reduce the risk, that seems likely to me, though admittedly that's only because it would be SANE for HMRC to focus on larger amounts rather than smaller ones, and sanity is not a guarantee.

Gifting your wife shares just before closing probably increases the risk. But nobody can really quantify these risks.

[jamesbrown]

Interesting seems I have not factored in the £11,100 CGT allowance, so is the ER difference really that relevant?

Bear in mind that the TiS rules apply to any capital distribution (that is within scope), not simply a capital distribution to which ER has been applied. People often conflate ER with a capital distribution more generally. The risk, in the event that TiS bites, is having a capital distribution reclassified as a dividend distribution (so ER is relevant only insofar as it determines the amount at stake).

[northernladuk]

if all lawyers agreed their entire business model would collapse

What in earth are you harping on about now?

[pr1]

If you are should you not be speaking to a specialist that knows your situation rather than a bunch of strangers on the net who don't seem to agree either.......

if all lawyers agreed their entire business model would collapse

[TheFaQQer]

Interesting seems I have not factored in the £11,100 CGT allowance, so is the ER difference really that relevant?

I could gift my wife 50% of the shares as she has 11k available this year before the higher rate. So up to 10k Divi each before, 5k each after, and then wind up as capital with an 11.1k allowance each??

Yes, you could.

I'd get onto someone who knows what they are talking about rather than a bunch of randoms on the internet.

[northernladuk]

Interesting seems I have not factored in the £11,100 CGT allowance, so is the ER difference really that relevant?

I could gift my wife 50% of the shares as she has 11k available this year before the higher rate. So up to 10k Divi each before, 5k each after, and then wind up as capital with an 11.1k allowance each??

Is it really worth embarking on a knee jerk set up that is clearly for no reason than to aggressively avoid tax for the savings you will make? If you are should you not be speaking to a specialist that knows your situation rather than a bunch of strangers on the net who don't seem to agree either.......

[segster]

Interesting seems I have not factored in the £11,100 CGT allowance, so is the ER difference really that relevant?

I could gift my wife 50% of the shares as she has 11k available this year before the higher rate. So up to 10k Divi each before, 5k each after, and then wind up as capital with an 11.1k allowance each??

[segster]

Thanks for the suggestions. WordIsBond's sounds the most sensible balance of risk/reward.

[jamesbrown]

The first £30k of a redundancy payment is free of tax. Sounds like you could be being made redundant. Just saying (... and goes to get the popcorn).

Incidentally, the recent budget introduced NI on these payments from 2018. Anyway, even if you do have a formal contract of employment (most directors do not), you can't terminate your own employment and claim redundancy.

[FarmerPalmer]

The first £30k of a redundancy payment is free of tax. Sounds like you could be being made redundant. Just saying (... and goes to get the popcorn).

[TheCyclingProgrammer]

HMRC are obliged to apply the rules.

Only when the mood takes them.

[Louisa@InTouch]

It's still unclear in the legislation. The cautious approach would be to assume that it might also apply to those in employment doing the same 'activity' or wait and see when it's been clarified.

If you decide to distribute as a gain, claiming ER, you could keep cash aside and then suffer any interest/penalties if you are caught at a later date.

HMRC are obliged to apply the rules, even if the outcome is not as originally intended. A court/tribunal will apply the law as it's written. So there is a risk and it should be considered.

[jamesbrown]

I believe that's no longer possible after 6th April 2016.

No changes there AFAIK. The 25k was legislated back in 2012 and doesn't require clearance, unlike the old concession, ESC C16, which wasn't capped, but did require clearance. Basically, an MvL only makes sense if the distribution is substantially above 25k. Note that the Transactions In Securities rules would still apply, but I agree with WiB that it's less likely to cause problems.

[WordIsBond]

Citation?

There are new restrictions on MVL, but the £25K threshold, as far as I know, is still operative. And even if HMRC goes stupid on challenging people who aren't contracting any more, I doubt they'd do it for someone below £25K.

The approach I suggested saves having to pay Maslins anything (sorry!) and reduces the risk of it being challenged. The risk of losing is low either way. And by taking about half of it as dividend, it reduces the cost in the unlikely event that a challenge by HMRC would succeed.

[AtW]

Then, since you will be under £25K, wind up taking the remainder as capital.

I believe that's no longer possible after 6th April 2016.