Reply to: Paying family members dividends from my limited company..

[aubergine]

cheers for all the advice, point taken

[Platypus]

You pay your mother a dividend and she gifts it back to you. I think you can work that out can't you?

I think what NLUK is getting at here is that this would be deemed tax evasion, since you're getting the money via a not-very-subtle route.

More details here:
Contractor guide to splitting dividends

In the Arctic case, gifting to a spouse was ok. But for a non-spouse, it's not.

Hope I'm not repeating what previous posters said, I didn't read the whole thread

[kingcook]

Sure we've done this many times before?

BTW - Can I make my cat a shareholder/employee?

It worked for Harry Redknapp, so why not...

[Nixon Williams]

Hi

Are there any issues with enlisting a family member - my mother for example - as a shareholder in my limited company, and paying them yearly dividends?

What about if the same family member makes cash gifts or loans to me personally?

Even though the arrangements are entirely separate, would the revenue be of the same view?

Thanks

Edit:

What if my mother were to be employed, rather than listed as a shareholder, does that change the situation?

Assuming that you are a regular contractor with just yourself working through the company, then it would not be recommended to have your mother as a shareholder of the company.

From the question, I assume your plan is to pay her a dividend and then for her to gift you this money! There are so many things that you will fall foul of, but the basic answer is NO!

Likewise the salary route probably will not work. If you decide to pay her a reasonable, market rate salary for the work sshe does, then it should be fine, although I cannot see what amount of work she could do to justify a salary of more than say, £1000.

Structured correctly, the current tax rules can enable you to retain quite a large amount of the money you generate, there is probably no need to take risks such as you describe or going off shore etc.

[psychocandy]

Sure we've done this many times before?

BTW - Can I make my cat a shareholder/employee?

[muser]

......and if you do decided to embark on this scheme

9) Buy a Rabbits foot, sprig of heather, 4 leaf clover, cross everything you have and pray to whatever god you worship that you never get investigated.

The right or the left foot? Also, can the above be claimed as business expenses?

[Project Monkey]

Unless it is an artificial situation to avoid tax which it clearly is from the approach to this situation.

You can only pay your mother FOR THE WORK SHE DOES. Just paying her for nothing to avoid tax is also gonna land you in hot water.

Just run your affairs properly and stop trying to make up schemes to avoid tax.

Yep, that's it.

[Project Monkey]

and there may be a rule about the amount you pay being proportionate to the work done.

[northernladuk]

No problem provided the company pays relevant PAYE & NI and you declare the personal income if she hands the cash back to you
.

Unless it is an artificial situation to avoid tax which it clearly is from the approach to this situation.

You can only pay your mother FOR THE WORK SHE DOES. Just paying her for nothing to avoid tax is also gonna land you in hot water.

Just run your affairs properly and stop trying to make up schemes to avoid tax.

[Project Monkey]

What if my mother were to be employed, rather than listed as a shareholder, does that change the situation?

No problem provided the company pays relevant PAYE & NI and you declare the personal income if she hands the cash back to you
.

[Project Monkey]

Are there any issues with enlisting a family member - my mother for example - as a shareholder in my limited company, and paying them yearly dividends? Yes.

What about if the same family member makes cash gifts or loans to me personally? You should declare any personal income.

Even though the arrangements are entirely separate, would the revenue be of the same view? Probably not.

[aubergine]

What if my mother were to be employed, rather than listed as a shareholder, does that change the situation?

[northernladuk]

I used to do it all the time - though admittedly it was pre 1994. Have the rules changed?

What? Apply some common sense? I don't think the laws around using common sense have changed since 1994 but there definitely seems to be a decline in its use.

[aubergine]

Apologies, I did search but didn't find anything immediately useful

I'll have a look through the links, though I'm guessing the answer is 'forget it'!

Cheers.

[BrilloPad]

5) Apply a bit of common sense. You pay your mother a dividend and she gifts it back to you. I think you can work that out can't you?

I used to do it all the time - though admittedly it was pre 1994. Have the rules changed?