Income Shifting !

[tim123]

Could someone explain this bit please? If a company has husband/wife shareholders, but doesn't take any further dividends then how can it apply to accumulated funds in the company account?

It doesn't

I was asuming that you would want to take dividends, because that is still likely to be the most cost effective way of withdrawing the money.

You can't leave the money in there forever. Well you can, but what would be the point of earning it if you did?

tim

[malvolio]

Could someone explain this bit please? If a company has husband/wife shareholders, but doesn't take any further dividends then how can it apply to accumulated funds in the company account?

What happens when you take the money out? Like when you retire in 20 years time. Or sell the company to someone else...

[Crossroads]

not only does it apply to established companies, as mav has already pointed out it will apply to already accumulated funds.
and no, it doesn't just apply to Husband and wife

tim

Could someone explain this bit please? If a company has husband/wife shareholders, but doesn't take any further dividends then how can it apply to accumulated funds in the company account?

[dude69]

That's what the accountants are saying, and as a risk mitigation strategy it seems quite sensible.

Hang on though - if everyone clears the company bank account with a bit end-of-tax-year divvy, and pays a big lump of HRT as a result, then Gordon's Darling cancels the idea. Big tax lump sum payment acros the country, "ha ha, fooled you!" from Gay Gordon...

Plan for it but leave it as late as possible might be a good idea.

You can back-date dividend declarations a week or two without problem.

[Pondlife]

Isn't this C16 discretionary (sp?) and can be refused if they decide it's being done for tax avoidance reasons?

[THEPUMA]

if you have a big wad in the company , close the company via capital distribution this year and start afresh next year with a new co

This probably doesn't work in the majority of cases. If you rely on ESC C16, this states that you are ceasing to trade, as opposed to continuing the trade via another company.

Having said that, I should imagine many will try their luck.

[sidknows]

if you have a big wad in the company , close the company via capital distribution this year and start afresh next year with a new co

[malvolio]

That's what the accountants are saying, and as a risk mitigation strategy it seems quite sensible.

Hang on though - if everyone clears the company bank account with a bit end-of-tax-year divvy, and pays a big lump of HRT as a result, then Gordon's Darling cancels the idea. Big tax lump sum payment acros the country, "ha ha, fooled you!" from Gay Gordon...

Plan for it but leave it as late as possible might be a good idea.

[rootsnall]

By the way, it's not Income Splitting. It's a "Family Business Tax". Take note...

Ok

So the current thinking is I should clear out my company coffers and utilise the non working Mrs tax allowance for 2007/2008 even if it pushes me personally into the higher rate band. I was quite proud of myself last year that a quick fag packet calc for my final dividend left me within about 200 quid of the higher band when I just did my self assessment. Trouble is it now means I've got a big wad in the company.

[tim123]

not only does it apply to established companies, as mav has already pointed out it will apply to already accumulated funds.

and no, it doesn't just apply to Husband and wife

tim

[DaveB]

Will the new idiocy - sorry, I meant to say legislation - apply only to companies formed after it comes in to effect or will it apply to all companies regardless of their date of incorporation?

I'm assuming they havn't been so daft as to specify that it has to be husband/wife relationship to be caught but instead made it sufficiently nebulous that other partners or non-spouces get caught by it.

[malvolio]

Who knows. The law will be passed in April - probably. It might even be possible to apply it without every single case being challenged on the grounds that the rules are not clear. Someone may launch a national campaign to get it stopped.

Accountants' advice is to do as you suggest, specially since it if is passed, it can be charged on money already in the company. I doubt anyone has a definitive answer though.

By the way, it's not Income Splitting. It's a "Family Business Tax". Take note...

[rootsnall]

What is the latest with the proposed legislation ?

Should I be looking to transfer the Mrs shares back into my name come April or wrap up the Ltd and start again with me as 100% share holder ?