Alphabet Shares - Confused

[northernladuk]

What a pair of fart knockers. I thought this was a discussion forum?

If you can't contribute anything useful then why don't you just shut up?

Aww Wanderer... Don't be grumpy.

He asked 3 questions, none of which we are really in a position to answer so we answered with the best advice for the OP.

Either that or we were discussing why he didn't go to a professional, either way... here's your dummy back....

[Wanderer]

Have you thought about asking a professional these questions?

Why would he do that when he could ask a bunch of random strangers?

What a pair of fart knockers. I thought this was a discussion forum?

If you can't contribute anything useful then why don't you just shut up?

[TheCyclingProgrammer]

The other one is family related where it was deemed that the father was in control of all the funds.. I can't remember the exact name off the top of my head...

Just to be clear, obviously a settlor can still retain an interest in settled property if the recipient is somebody other than their spouse/civil partner. A very obvious example would be a trust situation where the settlor controls the trust or is a beneficiary of it. There is also s629 which kicks in if the recipient is a minor child. I just don't think there's any evidence of that in OPs case. Would be interested to see read about the case though.

[TheFaQQer]

TSEM4220 - Settlements legislation: about dividend waivers (last paragraph)

If this wasn't the case, then pretty much any dividend waiver would be caught but that's not the case.

It does raise the question of whether or not there is a legal requirement for the company to have enough funds to cover the full dividend, including the waived amount, in a more general sense (completely aside from the settlements issue). Do you know which recent cases didn't apply to spouses? The most recent case I'm aware of that HMRC won was the Donovan & McClaren case, which again was lost due to the waivers benefitting the director's wives.

As per the other thread on this subject, see TSEM4225

[eek]

Sure, I appreciate that, but that alone wouldn't be enough for them to win a settlements case - it would be indicative of there being an element of bounty however which is what would open up the challenge in the first place. But the waiver still has to be between spouses or civil partners for the legislation to apply, generally (otherwise the dividend needs to be payable to or benefit the person who waived the dividend in some way).

TSEM4220 - Settlements legislation: about dividend waivers (last paragraph)

If this wasn't the case, then pretty much any dividend waiver would be caught but that's not the case.

It does raise the question of whether or not there is a legal requirement for the company to have enough funds to cover the full dividend, including the waived amount, in a more general sense (completely aside from the settlements issue). Do you know which recent cases didn't apply to spouses? The most recent case I'm aware of that HMRC won was the Donovan & McClaren case, which again was lost due to the waivers benefitting the director's wives.

The other one is family related where it was deemed that the father was in control of all the funds.. I can't remember the exact name off the top of my head...

[TheCyclingProgrammer]

Don't bet on that. The issue hmrc dislikes is any time when the total potential dividend is greater than distributable profits. The other recent examples aren't related to spouses

Sure, I appreciate that, but that alone wouldn't be enough for them to win a settlements case - it would be indicative of there being an element of bounty however which is what would open up the challenge in the first place. But the waiver still has to be between spouses or civil partners for the legislation to apply, generally (otherwise the dividend needs to be payable to or benefit the person who waived the dividend in some way).

TSEM4220 - Settlements legislation: about dividend waivers (last paragraph)

If this wasn't the case, then pretty much any dividend waiver would be caught but that's not the case.

It does raise the question of whether or not there is a legal requirement for the company to have enough funds to cover the full dividend, including the waived amount, in a more general sense (completely aside from the settlements issue). Do you know which recent cases didn't apply to spouses? The most recent case I'm aware of that HMRC won was the Donovan & McClaren case, which again was lost due to the waivers benefitting the director's wives.

[northernladuk]

Don't bet on that. The issue hmrc dislikes is any time when the total potential dividend is greater than distributable profits. The other recent examples aren't related to spouses

Indeed and it may be fine but he certainly wants to avoid an investigation while HMRC satisfy themselves all is well.

[eek]

I wouldn't have thought OP would need to worry about that unless their business partner is also their spouse/civil partner.

They definitely need professional advice though.

Don't bet on that. The issue hmrc dislikes is any time when the total potential dividend is greater than distributable profits. The other recent examples aren't related to spouses

[TheCyclingProgrammer]

+1. You really need an accountant when doing stuff like this to avoid things like Tribunal rules dividend waiver was settlement | AccountingWEB

I wouldn't have thought OP would need to worry about that unless their business partner is also their spouse/civil partner.

They definitely need professional advice though.

[eek]

Have you thought about asking a professional these questions?

+1. You really need an accountant when doing stuff like this to avoid things like Tribunal rules dividend waiver was settlement | AccountingWEB

[northernladuk]

Why would he do that when he could ask a bunch of random strangers?

Good point well made. Silly me.

[aoxomoxoa]

Have you thought about asking a professional these questions?

Why would he do that when he could ask a bunch of random strangers?

[northernladuk]

Have you thought about asking a professional these questions?

[slice16]

Afternoon All,

Before I delve into my rather complicated question, I think a brief history would help set the scene. Back in 2013 I decided I want to start building up a company that would offer various 'Managed Hosted Solutions' to customers. This was setup as a LTD, with a 50/50 share structure between myself and my business partner. It was decided that I would go into Contracting to build up the relevant capital and pay myself with a mix of salary/dividends (although no where near to the 75% or so take home some people are able to get). Whenever I received a dividend, my business partner waived his right to his own. These have been marked as part of the directors meetings.

We are now at a point when we have the relevant capital to start the original business idea. Due to timings and other circumstances, I have decided to keep contracting by seperating the two business units into two different LTDs. We have decided to pay each other a dividend (50% each of the required capital) and start a new business. This way, I get to keep hold of other reserves in the contracting business and have the accounts for year one (which helps )

Everything within that makes sense. I have asked my business partner if he can carry on doing the accounts for my contracting and he has talked about implementing an Alphabet share structure. This is where I get confused. I wondered if you lovely people could please shed some light on the setup, and anything we both need to be aware off?

The suggestion is to create a B class share which is worth 5%, and a fixed dividend paid per month (as long as profits are met). What does this actually mean from an ownership/capital point of view?
1) If I was to fold the contracting business (if the new business takes off), would he be entitled to 5% of whatever is left within the business?
2) If I were to sell on the contracting side (unlikely I know), but would there be a different price for the B class shares?
3) Is there anything else we should be aware off?



Thanks in advance,

Paul