Reply to: Two really quick questions - sorry guys, I know you've heard them all before!

[ASB]

Op. I would seriously hope that you have misinterpreted what your accountant said.

You can gift any asset (which is what the shares are) to anybody you damn well please. Including your cat (if you have one).

It really is no different than, say, giving her your car.

That is in terms of the ownership of course, not the potential taxation consequences. (Your words make it clear to me that the arrangement should be caught - that doesnt mean i am right - and this thread will most likely be presented to you in any enquiry).

Now, on the assumption that ir is not caught have you worked out what your tax saving will be? It wont necessarily be a lot. And the more your partner earns, the smaller it will be.

A good question to ask yourself is "would i do this for simply anybody". If the answer is no - which if it isn't where do i sign - then hmrc view is "caught".

A full investigation is an expensive process. Defending it will cost more than the tax saved in all probability. Losing will likely double the tax bill and present it to you. Holding your hands up will also involve the tax, likely 25 pc penalty and interest.

Of course it is hard to quantify the risk of investigation.

Your money, your risk, your choice. But in my view you are definitely well inside the grey zone.

[mudskipper]

I want to maximise my after tax income, should I be without work for a period of time.

I think you've just fallen over here. By making your girlfriend a shareholder, you are minimising the tax yourCo pays, but you are not maximising your income - the income is hers and hers alone. Why would you give away n% of yourCo's income?


Re living in zone1 - get a company bike and get fit at the same time as commuting

[northernladuk]

But I'm guessing you still won't go and do any research so the sticky I mentioned is here

http://forums.contractoruk.com/showthread.php?t=95689

[northernladuk]

I agree. However, am I right in saying that nothing is stopping me gifting my girlfriend a percentage of the company? My accountant implied I actually could not do it unless we were married.

I don't know. I thought it was a no no and many of the guides appear to say something similar but a couple of our esteemed posters put up some arguments that tend to suggest otherwise but a) not distinctly enough for me and b) not for someone in your situation. I think you are crazy for wanting to do it for the reasons already mentioned but it appears from that comment you don't really care about the warnings so just full your boots.

I don't work within the square mile, but I get the point you're making. My previous (permanent) job was a different route to the current one, but no different in terms of time. Also I actually live in Zone 1... which probably doesn't help my case either . A couple of colleagues live in Zone 4 and work in Zone 1 and they claimed their travel expenses for the first 24 months contracting, then paid the costs themselves thereafter. Also, as you say, it seems to be a very grey area and one that is just going to be a judgement call.

The clock doesn't reset just because you switched from perm to contract I don't believe. If the next gig that get is close enough then that is still classed as their permanent workplace. I think you are looking at the wrong bit with that FTA. As I say, again, there are plenty of guides to the right and all the legislation that covers this has been linked more than enough times. Hell there is even a stickied thread in exactly this that I believe dissolved in to a London argument... But.. If you live and work in zone 1 you are screwed. And take your permie work in to consideration as well.

Yeah I agree. Plus with that Fixed Term Appointment thing, I think my workplace wouldn't even qualify as temporary anyway.

I think that is not the piece of leguslation that is your problem.

[Osiris1337]

Since most issues come down to "well you can, but whether you should depends on...", I think I'm asking the wrong questions. I'm going to ask my accountant to estimate the risk level associated with claiming expenses. Over this weekend, I've read all the HMRC docs myself and frankly I'm still at the "well I can but there's a risk", so I guess their experience in the field regarding how many people on their books have been investigated, what the results were etc, will allow me to make a better informed decision.

There's a risk in getting on a plane - albeit tiny - but everyone does it...

[Osiris1337]

IMO with that set up and the length of time you've been together you are exposing yourself to much more risk than you are going save yourself. You are talking about saving not much more tax at the distinct possibility someone will own half of company when it goes south. I'd just wait until that risk dies down personally.

I agree. However, am I right in saying that nothing is stopping me gifting my girlfriend a percentage of the company? My accountant implied I actually could not do it unless we were married.

Working in the square mile is documented (I believe) to not reset the 24 month rule.

I don't work within the square mile, but I get the point you're making. My previous (permanent) job was a different route to the current one, but no different in terms of time. Also I actually live in Zone 1... which probably doesn't help my case either . A couple of colleagues live in Zone 4 and work in Zone 1 and they claimed their travel expenses for the first 24 months contracting, then paid the costs themselves thereafter. Also, as you say, it seems to be a very grey area and one that is just going to be a judgement call.

Working and living there means journey cannot really be that significantly different so you can't claim an expenses for this

Yeah I agree. Plus with that Fixed Term Appointment thing, I think my workplace wouldn't even qualify as temporary anyway.

[northernladuk]

Our finances are pretty separate. We have no joint bank accounts and no joint assets. We are in rented accommodation and household direct debits are set up in my name. Things like her mobile phone contract, her health insurance etc come out of her bank.

IMO with that set up and the length of time you've been together you are exposing yourself to much more risk than you are going save yourself. You are talking about saving not much more tax at the distinct possibility someone will own half of company when it goes south. I'd just wait until that risk dies down personally.

Ok cool, so let me provide more information. I live in London and I work in London, so my commute consists of a tube journey each day to and from work. Aside from a handful of occasions, I will be based at the same office for the duration of the contract. The bit I believe I might get caught out on with the 24 month rule is the Fixed Term Appointment part, which would seem to make my workplace get regarded as a Permanent Workplace.

Still not detailed enough. London is a very difficult subject. Working in the square mile is documented (I believe) to not reset the 24 month rule. There is a large grey area about east and west London with many people having different opinions. If the journey is significantly different and costs significantly more then the rule 'might' reset. IMO and extra 20 mins, few stops and a few quid is not significant.

How about you read the articles in the right and use the search method as explained in a sticky in the FAQ area rather than us open this can of worms based on incomplete information. There is more than enough discussion in those for you to make you own opinion. If you can't then my view is working and living there means journey cannot really be that significantly different so you can't claim an expenses for this, and argue any previous gig's you've done.

[Osiris1337]

But what are you trying to achieve?

Pay less tax. I'm a contractor, which comes with a lot of risk, so I want to maximise my after tax income, should I be without work for a period of time.

But really it depends. The more joined your finances the more likely an interest is to be retained.how are all the bills paid. Where does that funding come from. Do you have joint assets and liabilities. All would possibly increase the risk.

Our finances are pretty separate. We have no joint bank accounts and no joint assets. We are in rented accommodation and household direct debits are set up in my name. Things like her mobile phone contract, her health insurance etc come out of her bank.

Some accountants see themselves as agents of the taxman.

This seems to be the case here. He speaks like he has a real, personal gripe with people who don't pay the tax he feels they should. Honestly, the conversation was a one way monologue for ages whilst I stood outside work on my mobile trying to get a word in edgeways. I had to forcefully interrupt him to get in my other questions. It's all good though - he's entitled to his opinion and he's built a successful business. If our views don't align, I'm happy to go elsewhere.

The reason not to give shares to an unmarried partner is if you separate the other party can't give the shares back to you. They also have no legal obligation to sell the shares back to you, and then you would be legally obliged to pay dividends to them until the company has no funds to do so.

If you were married half the company's income would be the spouse's anyway. However if they aren't a shareholder it is more difficult for them to find out how much the company has.

This is good to know. Thanks for clarifying.

I appreciate that everyone's focused on the tricky part of the OP's question, but the expenses one is pretty straightforward if where they've worked for the last 24 months is known.

Your contractor colleagues will claim expenses if they previously worked in Manchester or Leeds (for example) in the last 24 months. There are nuances to this so look up the thread on the 24 month rules.

Ok cool, so let me provide more information. I live in London and I work in London, so my commute consists of a tube journey each day to and from work. Aside from a handful of occasions, I will be based at the same office for the duration of the contract. The bit I believe I might get caught out on with the 24 month rule is the Fixed Term Appointment part, which would seem to make my workplace get regarded as a Permanent Workplace. "The client’s site cannot be a temporary workplace if the contractor is working on a contract “that can be expected to last for all, or almost all, of the period for which he or she is likely to hold, or continue to hold, that employment"

[northernladuk]

So in a nutshell
1) we don't know to didn't provide enough information.
2) It appears to be possible arguably it isn't a good idea.


But neither are 'quick' questions.

[TheCyclingProgrammer]

I'm sure one of the former Tory chancellors - Nigel Lawson - said that was just one the unintended consequences of the legislature as married couples would always maintain an interest in such gifts given to each other.

They would but not for the reason highlighted, but due to the way the legislation is written (which by default treats one person as retaining an interest if their spouse does).

That's why they added the spouse exemption, to make things fairer to married couples. As I said before, its effect is not to give married couples an unfair advantage, but simply to put them on the same footing as unmarried couples.

[SueEllen]

This is of course likely to be HMRCs only real line of attack in an unmarried situation, assuming no other dodgy conditions were attached to the gift of shares and is where the main risk lies.

That being said, they could have made the same argument in the Arctic case, that Mr Jones still benefitted from the dividends paid to his wife and therefore that the gift was not an outright gift as he retained interest in his own right.

They didn't though (IIRC, or if they did the judges dismissed it) so I don't personally view it as a strong argument from HMRCs point of view.

I'm sure one of the former Tory chancellors - Nigel Lawson - said that was just one the unintended consequences of the legislature as married couples would always maintain an interest in such gifts given to each other.

[SueEllen]

The reason not to give shares to an unmarried partner is if you separate the other party can't give the shares back to you. They also have no legal obligation to sell the shares back to you, and then you would be legally obliged to pay dividends to them until the company has no funds to do so.

If you were married half the company's income would be the spouse's anyway. However if they aren't a shareholder it is more difficult for them to find out how much the company has.

[northernladuk]

Really appreciate any responses - I know you must get this all day every day.

Cheers.

Yes we do. If you realise this why don't you do something to help yourself find the answers first?

[TheCyclingProgrammer]

But really it depends. The more joined your finances the more likely an interest is to be retained.how are all the bills paid. Where does that funding come from. Do you have joint assets and liabilities. All would possibly increase the risk.

This is of course likely to be HMRCs only real line of attack in an unmarried situation, assuming no other dodgy conditions were attached to the gift of shares and is where the main risk lies.

That being said, they could have made the same argument in the Arctic case, that Mr Jones still benefitted from the dividends paid to his wife and therefore that the gift was not an outright gift as he retained interest in his own right.

They didn't though (IIRC, or if they did the judges dismissed it) so I don't personally view it as a strong argument from HMRCs point of view.

[malvolio]

I used to have a very safe accountant. After a conflict I switched to QDOS. Who were far easier to deal with. And less safe. And I got less enquiries from QDOS.

Some accountants see themselves as agents of the taxman.

Rubbish. An accountant is paid to keep you out of jail or from paying unnecessary fines. If you have one whose advice you can ignore without knowing why, or who is relaxed about you skirting the edges of good practice, you're not in a good place.

The basic rule with all tax matters is just because you can doesn't mean you should. Your accountant is there to draw the line in the sand, not just add up the numbers.