Reply to: Restructuring share structure of an LTD

[RonBW]

I take your point and, as I said, it depends on your relationship with your family.

I would prefer to share my wealth with family members and reduce the overall family tax liability even if that means I am personally worse off.

Many contractors have no hesitation in doing a 50/50 share with a spouse (which has a possibility of ending up in divorce), but don't consider other flesh and blood family members whose relationship could be more long lasting.

I'd sooner stick pins in my eyes than risk my money ending up with my brothers wife and / or his awful children

The rest of them I have no qualms about, but not them. For me it's a moot point - my parents have significantly higher disposable income than I'll ever have, I think. Until they die of course....

[northernladuk]

I take your point and, as I said, it depends on your relationship with your family.

I would prefer to share my wealth with family members and reduce the overall family tax liability even if that means I am personally worse off.

Many contractors have no hesitation in doing a 50/50 share with a spouse (which has a possibility of ending up in divorce), but don't consider other flesh and blood family members whose relationship could be more long lasting.

But it's been argued that the wife supports the husband as per the Arctic case. The family doesn't. By distributing to them you are just using it as a tax advantage which is against the spirit of the rules...and I am sure if you get too complacent and get it wrong against the actual rules. It's not something I believe we should be actively advocating.
There must a be a good reason why many of the guides advise against including anyone but your spouse.

Maybe not in your case but I'd be willing to bet a good majority of people with family involved in their share structure will be expecting the money back in some form or other in the short term.

[minstrel]

That's assuming that you are the sole beneficiary of their will. I know my parents leave everything to me, my brother and my sister, plus a number of charities and also to the grandchildren.

It might work in some cases but I'd guess that in the vast majority it won't.

I take your point and, as I said, it depends on your relationship with your family.

I would prefer to share my wealth with family members and reduce the overall family tax liability even if that means I am personally worse off.

Many contractors have no hesitation in doing a 50/50 share with a spouse (which has a possibility of ending up in divorce), but don't consider other flesh and blood family members whose relationship could be more long lasting.

[northernladuk]

That's assuming that you are the sole beneficiary of their will. I know my parents leave everything to me, my brother and my sister, plus a number of charities and also to the grandchildren.

It might work in some cases but I'd guess that in the vast majority it won't.

And I would have said exactly the same.

[RonBW]

Ultimately, the money is probably all coming back to you via inheritance anyway.

That's assuming that you are the sole beneficiary of their will. I know my parents leave everything to me, my brother and my sister, plus a number of charities and also to the grandchildren.

It might work in some cases but I'd guess that in the vast majority it won't.

[minstrel]

But you are just giving money away to your parents. How can that be good tax planning? Not a good idea getting your parents involved in your LTD.

This depends on your individual circumstances and your relationship with your parents, but I see two ways of looking at it:

1. Your parents gave you a lot of financial support over the years bringing you up and maybe helping out with uni fees or deposit for a house. Whilst you may not personally be better off transferring the shares, the family as a whole might be better off. And do you really want to be sitting on a £100k+ income and watch your parents struggle on a state pension?

2. Your marginal tax rate on a £100k+ contractor income is potentially around 46%. Why not make use of your parents' lower tax rates? Ultimately, the money is probably all coming back to you via inheritance anyway.

I wonder how many millionaire businessmen there are out there that don't involve their family to some extent in their tax planning.

[northernladuk]

What if the OP sold some of his shares to his parents based on an independent valuation of the company?

Would this make a difference?

This potentially avoids it being treated as a settlement and could be good for IHT and CGT planning.

But you are just giving money away to your parents. How can that be good tax planning? Not a good idea getting your parents involved in your LTD.

[minstrel]

What if the OP sold some of his shares to his parents based on an independent valuation of the company?

Would this make a difference?

This potentially avoids it being treated as a settlement and could be good for IHT and CGT planning.

[SlipTheJab]

>> The idea is to myself to hold 51 shares, my wife 24 A, my mother 12 B and my father 12 C.

Who gets the other share?

His Cat HTH.

[northernladuk]

>> The idea is to myself to hold 51 shares, my wife 24 A, my mother 12 B and my father 12 C.

Who gets the other share?

Excellent spot

[malvolio]

So you intend to effectively gift your parents £5k each year?

I don't think it's necessarily caught by s624 of the settlements legislation as you need to retain an interest in the shares or any derived income for that to be the case, but it would certainly raise some flags.

What the legislation says, in effect, is that immediate family members other than your spouse are "connected persons" for the purposes of the law. Ergo, you will have an interest in the shares and associated dividends.

[fidot]

>> The idea is to myself to hold 51 shares, my wife 24 A, my mother 12 B and my father 12 C.

Who gets the other share?

[TheCyclingProgrammer]

So you intend to effectively gift your parents £5k each year?

I don't think it's necessarily caught by s624 of the settlements legislation as you need to retain an interest in the shares or any derived income for that to be the case, but it would certainly raise some flags.

[pr1]

Questions:
Can I restructure company share/capital structure?
Will the above setup bring any problems?

Answers:
Yes
Yes

[northernladuk]

Because he can issue different divvies to the different share classes AFAIK. So one year he, his wife and his folks all get the £5K free but then next year he can distribute more or less to each class as his and his families tax situation changes.

I think he means why Class B for dad and Class C for mum.