Adding my Father in India as a shareholder to my Company

[Project Monkey]

I can't understand why you need to ask what the purpose of this is. He works in the UK and sends money he earns home. Instead he wants to avoid tax by sending it straight from the company to his farther.

[Wanderer]

Is it only because the poster said it was India that all the right-wing racist "pay your taxes" replies came out?

Oh dear, the dreaded racist card.

I think you will find that we are just as right wing with anyone who tries to aggressively avoid tax through anything other than the generally accepted practices. Income splitting with someone who is not your spouse is always going to be sailing pretty close to the wind in my opinion.

The poster clearly said he would pay his father as a dividend, and as most people here know, dividends already come out of post-tax profits of the company. In other words, all company tax has already been paid.

If the director is a higher rate tax payer then they are liable to pay tax personally on their dividend income so they are avoiding tax paying tax personally by income splitting like this. If they are not a higher rate tax payer then there is no tax advantage to doing it, is there?

HMRC are always going to be suspicious that the director gets some benefit from the money or that the director would have been paying money to their father anyway and this is simply a way to avoid paying UK tax.

Feel free to ask HMRC for their opinion and see if they are "racist" too though.

[northernladuk]

Is it only because the poster said it was India that all the right-wing racist "pay your taxes" replies came out?

Not really, people who want to pay members of their own family over here get similar responses but we do get a bit tired of posts from the Indian guys wanting to farm their money offshore without understanding it and assuming it is that easy.

The poster clearly said he would pay his father as a dividend, and as most people here know, dividends already come out of post-tax profits of the company. In other words, all company tax has already been paid. And looking at it from a different perspective, the father has therefore paid UK taxes even though he does not reside in the UK nor avail himself of any UK public services (whether he then gets a credit from the Indian government based on any double-taxation agreement is outside the scope of this).

You are forgetting personal taxation on the money he should pay himself then send to his father.

The OP's question was whether or not this would impact IR35, which it shouldn't. However, as Wanderer pointed out, there may be settlement of income implications.

will

[meridian]

Instead he wants to avoid tax by sending it straight from the company to his farther.

Great idea! Hey, why not add your whole extended family as shareholders too and you can draw money from the company and pay no tax at all!

If you are here as a permanent resident then you should pay the Taxes that the Law demands in the manner that they demand it...

I know that in India they pay 0 taxes and hence nothing is free but here in UK, where you have chosen to migrate, people pay up their share of taxes and hence get some public services free.

Is it only because the poster said it was India that all the right-wing racist "pay your taxes" replies came out?

The poster clearly said he would pay his father as a dividend, and as most people here know, dividends already come out of post-tax profits of the company. In other words, all company tax has already been paid. And looking at it from a different perspective, the father has therefore paid UK taxes even though he does not reside in the UK nor avail himself of any UK public services (whether he then gets a credit from the Indian government based on any double-taxation agreement is outside the scope of this).

The OP's question was whether or not this would impact IR35, which it shouldn't. However, as Wanderer pointed out, there may be settlement of income implications.

[TheFaQQer]

Hello all,

I've a query regarding addition of a new shareholder to my 10 month old LTD company.
I'm planning to add my father (who's born and stays in India) as a shareholder.
I'll pay the dividends via transfer and have no problem regarding that. But, I need a clear answer about the addition of a shareholder who is living in India.

Do let me know if it's unnecessarily poking IR35.

thanks

Nothing to do with IR35, and there is nothing to stop you selling (or even gifting) shares to anyone else, regardless of their location.

Make sure you understand the settlements legislation, and also the Ramsay principle before going too far, though.

[fullyautomatix]

What about when you need an emergency operation on NHS or have to put your kids into school here ? Would you prefer to do that in India ? You cant have the cake and eat it too. I know that in India they pay 0 taxes and hence nothing is free but here in UK, where you have chosen to migrate, people pay up their share of taxes and hence get some public services free.

[bobspud]

What you should have done was incorporate a company in India that owns your UK company. The UK company can then pay the Indian company money for use of trademarks/ experience / expertise. All that money sent off shore reduces your liability for tax to be paid in the UK Just like the way Infosys, Google, Starbucks and every other multinational rips the piss out of our tax system. Of course those companies have big scarey lawyers that are paid fortunes to make HMRC look stupid at every possible opportunity. While you on the other hand can be thrown in jail for tax evasion (It would not be viewed as tax avoidance you will note!!!)

If you are only here as a transient perhaps the best way to handle your affairs would be to build a large pot of money up in the business, paying the right amounts of VAT and CT due to our country and then when you go home you could withdraw that money in a tax year where you were no longer UK resident.

If you are here as a permanent resident then you should pay the Taxes that the Law demands in the manner that they demand it...

[Wanderer]

I'm planning to add my father (who's born and stays in India) as a shareholder.
I'll pay the dividends via transfer and have no problem regarding that. But, I need a clear answer about the addition of a shareholder who is living in India.

Great idea! Hey, why not add your whole extended family as shareholders too and you can draw money from the company and pay no tax at all!

Unfortunately other people have had that idea too and the government has outlawed it, the only exception is between a husband and wife. All other transfers like this are classed as a "settlement" and you will personally be liable for tax on the money you pay so there is no tax advantage. Read all about it at S660 or do a search for S660.

If you get caught then you will have to pay the tax and penalties for tax evasion - don't do it.

[mudskipper]

Adding a shareholder won't affect your IR35 status. The only vaguely IR35 related consideration is that, if you were to be investigated and found to be inside IR35, you would need to pay tax/NI on all your company's income.

I don't know about legalities and tax in this situation - perhaps your accountant can help?

[northernladuk]

While it;s not illegal per se it will set the HMRC bells ringing - if you are squeaky clean no problem, but make sure you are..

Whats the purpose of doing this, because even on this scant evidence my Spidey senses are tingling....

I can't understand why you need to ask what the purpose of this is. He works in the UK and sends money he earns home. Instead he wants to avoid tax by sending it straight from the company to his farther.

[stek]

Hello all,

I've a query regarding addition of a new shareholder to my 10 month old LTD company.
I'm planning to add my father (who's born and stays in India) as a shareholder.
I'll pay the dividends via transfer and have no problem regarding that. But, I need a clear answer about the addition of a shareholder who is living in India.

Do let me know if it's unnecessarily poking IR35.

thanks

While it;s not illegal per se it will set the HMRC bells ringing - if you are squeaky clean no problem, but make sure you are..

Whats the purpose of doing this, because even on this scant evidence my Spidey senses are tingling....

[desiird]

Hello all,

I've a query regarding addition of a new shareholder to my 10 month old LTD company.
I'm planning to add my father (who's born and stays in India) as a shareholder.
I'll pay the dividends via transfer and have no problem regarding that. But, I need a clear answer about the addition of a shareholder who is living in India.

Do let me know if it's unnecessarily poking IR35.

thanks