Reply to: Initial Company Registration - online or form IN01?

[Rajiv Singh]

Thanks - and you are absolutely right - got my first appointment with my accountant next week, just thought I would save myself a few quid by setting up my limited company myself.

Set up my company with just me and the wife as ordinary shareholders - she's also a limited company owner so no tax benefit in paying her a dividend anyway, just there for the future in case she goes back into a permanent role.

That's good decision you have taken to book appointment with accountant. Usually accountants do it in included fixed monthly fee option, and don't worry about shareholding pattern of spouse as this can be modified at later stage when situation changes.

[TheCyclingProgrammer]

<devil's advocate>If the son buys the shares at the beginning when the company has no value, does that reduce the risk? They are paying a fair market price for the shares, after all.</devil's advocate>

Of course you can avoid any settlements legislation issues entirely if you can convince HMRC that any arrangement or transaction was not bounteous and therefore not a settlement in the first place.

Looking at HMRC’s examples I think they would still consider the gift of shares at startup a settlement.

https://www.gov.uk/hmrc-internal-man...anual/tsem4300

EDIT: I misread your post, I thought you were referring to the under 18 son.

In that case, I still don't think you'd be able to argue that there isn't a settlement - IIRC in the Arctic case the shares were subscribed for on formation and HMRC still considered the arrangement a settlement. So as this would be caught by s624 you'd have to prove that the settlor no longer retains any interest in the shares, just as you would with anyone else who isn't your spouse or civil partner (as a spouse or civil partner being the beneficiary would be caught automatically *unless* the spouse exemption applies).

As to what constitutes retaining interest when giving away shares to any non-spouse - a family member, a friend, an unmarried partner etc. - from all the discussions we've had on here I don't think there's a definitive answer. In theory giving away the shares with absolutely no conditions attached (so you have effectively no rights over or control over what is done with the shares or any derived income) should be enough. As I've said on here before, if there was a more creative argument that HMRC could make, I would imagine they'd have made it in the Arctic case (if HMRC could have proved that Mr Jones himself still retained an interest in the gifted shares for reasons other than that they were gifted to his spouse, the entire spouse exemption argument would be been moot). They didn't, so it's still a bit of an unknown.

[TheFaQQer]

If he's over 18, then not really any greater risk than giving shares to any other non-spouse.

<devil's advocate>If the son buys the shares at the beginning when the company has no value, does that reduce the risk? They are paying a fair market price for the shares, after all.</devil's advocate>

[MrButton]

Thanks - and you are absolutely right - got my first appointment with my accountant next week, just thought I would save myself a few quid by setting up my limited company myself.

Set up my company with just me and the wife as ordinary shareholders - she's also a limited company owner so no tax benefit in paying her a dividend anyway, just there for the future in case she goes back into a permanent role.

From what you have said, you don’t have a good understanding of the implications of how your shareholding is setup.

As everyone has said have your meeting with the accountant first. Often they will just do it for you.

I don’t think this is an area to save (literally) “a few quid” it can cost a lot more in the long run.

[TheCyclingProgrammer]

Thanks - and you are absolutely right - got my first appointment with my accountant next week, just thought I would save myself a few quid by setting up my limited company myself.

Set up my company with just me and the wife as ordinary shareholders - she's also a limited company owner so no tax benefit in paying her a dividend anyway, just there for the future in case she goes back into a permanent role.

If you’re both shareholders you’ll still need to pay her dividends each time you pay yourself unless you issue different classes of ordinary shares or she waives her right to dividends each time (dividend waivers aren’t necessary an issue if no tax is being saved but it’s extra unnecessary faff).

Again, speak to an accountant before you set anything up.

[TheCyclingProgrammer]

Surely 16 is the age where it changes?

For the purposes of the settlements legislation s629 applies to any unmarried child under 18.

[pastie321]

Thanks - and you are absolutely right - got my first appointment with my accountant next week, just thought I would save myself a few quid by setting up my limited company myself.

Set up my company with just me and the wife as ordinary shareholders - she's also a limited company owner so no tax benefit in paying her a dividend anyway, just there for the future in case she goes back into a permanent role.

[Lance]

How old is your son? If he's under 18, then you'll be liable for tax on any dividends he receives. If he's over 18, then not really any greater risk than giving shares to any other non-spouse.

If you want to pay your son a *small* salary for doing some work, then that might be OK, depending on what he does and what you define as small. Speak to an accountant.

Surely 16 is the age where it changes?

[TheCyclingProgrammer]

Thanks for pointing out the naivety on my part - I assume this is S660?

Is setting my son up as an employee and paying him a small salary to perform admin tasks a better option or will this also attract unwanted attention?

How old is your son? If he's under 18, then you'll be liable for tax on any dividends he receives. If he's over 18, then not really any greater risk than giving shares to any other non-spouse.

If you want to pay your son a *small* salary for doing some work, then that might be OK, depending on what he does and what you define as small. Speak to an accountant.

[northernladuk]

Thanks for pointing out the naivety on my part - I assume this is S660?

Is setting my son up as an employee and paying him a small salary to perform admin tasks a better option or will this also attract unwanted attention?

Bearing in mind it's a piss take then yes it will. Leave your kids out of your business. If you want to give them some money for working do it out of your own pocket. Don't make them your tax mules.

If you don't have an accountant, get one. If you do, spend more time talking to them.

[pastie321]

Thanks for pointing out the naivety on my part - I assume this is S660?

Is setting my son up as an employee and paying him a small salary to perform admin tasks a better option or will this also attract unwanted attention?

[pastie321]

No voting rights? Your son? Your accountant not doing it for you? Oh dear oh dear...

That is unless you're from Wales and 'your spouse and son' is one and the same person in which case it's not so bad.

I am Welsh as it happens, but I won't take offence.

Now get back on t'whippet ye rode in on and tek yer loaf of hovis back t'missus

[northernladuk]

[stek]

Son!!

Investigation-tastic!

[northernladuk]

Before @NLUK chirps in, have you spoken to your accountant about the share structure and whether it's appropriate?

and if he does think it's appropriate get a new accountant.