Reply to: using umbrella co, do i need to check contract in IR35?

[fzbucks]

Hey, if you pass your majority shareholding to me, it will help you save tax...

swap 50% of each company's shares with each other

[ASB]

so if i owned less than 5% of my own LTD co then i would be IR35 safe?

Yes.

The legislation requires a material interest, wihch is usually ownership of more the 5% of the share capital - but this also include control of more than 5%, right to receive more than 5% of the divis, right to receive more than 5% of the assets. Also the 5% includes associates.

[oraclesmith]

Hey, if you pass your majority shareholding to me, it will help you save tax...

[tim123]

then you're into the realms of reasonable share distribution, I guess you could quite ligitimatley sell your shares to your wife...

But then that could take her over the 37k personal threshold - all too complicated for me to think about.

I'm sure there's an easy answer why you can't do this...

It's because she is a 'connected' person as defined in the IR35 legislation.

If you gave the shares to an unconnected person it would work.

tim

[Moscow Mule]

If that's so, how did the MSC's work it out so (if I understand correctly) numerous contractors each had x% of a ltd co yet got paid dividends based on how much they brought into the company, not its overall profits?

Different classes of shares.

[Bluebird]

If that's so, how did the MSC's work it out so (if I understand correctly) numerous contractors each had x% of a ltd co yet got paid dividends based on how much they brought into the company, not its overall profits?

good point, but he doesn't really want to be an MSC does he....

[timh]

I would have thought that only owning 5% meant that I would only get 5% dividends, the other 95% going to the majority shareholder, who just by coincidence could be my wife

If that's so, how did the MSC's work it out so (if I understand correctly) numerous contractors each had x% of a ltd co yet got paid dividends based on how much they brought into the company, not its overall profits?

[malvolio]

How about Hector simply deciding it was an artificial construction with no business justification other than saving tax, in which case he would simply ignore it, treat all income as personal and tax it accordingly?

[oraclesmith]

S660a

[Bluebird]

I would have thought that only owning 5% meant that I would only get 5% dividends, the other 95% going to the majority shareholder, who just by coincidence could be my wife

then you're into the realms of reasonable share distribution, I guess you could quite ligitimatley sell your shares to your wife...

But then that could take her over the 37k personal threshold - all too complicated for me to think about.

I'm sure there's an easy answer why you can't do this...

[oraclesmith]

Surely not.. Otherwise I could employ permatemp contractors, give them 1% and pay them mostly in expenses and dividends! Would that make me a MSC?

If they all got 1%, they would get an equal 1% share of company profits by way of dividends if that's how you want to do it. They might not like this because they all get paid the same regardless of what they do.

[Spacecadet]

Surely not.. Otherwise I could employ permatemp contractors, give them 1% and pay them mostly in expenses and dividends! Would that make me a MSC?

I would have thought that only owning 5% meant that I would only get 5% dividends, the other 95% going to the majority shareholder, who just by coincidence could be my wife

[timh]

so if i owned less than 5% of my own LTD co then i would be IR35 safe?

Surely not.. Otherwise I could employ permatemp contractors, give them 1% and pay them mostly in expenses and dividends! Would that make me a MSC?

[Spacecadet]

To go a little further than malvolio.

If you are paid purely PAYE then as a matter of law IR35 cannot possibly apply.

IR35 can only kick in if you are paid other than PAYE (dividends generally) and you own more than 5% of the share capital of the potential intermediary.

so if i owned less than 5% of my own LTD co then i would be IR35 safe?

[ASB]

To go a little further than malvolio.

If you are paid purely PAYE then as a matter of law IR35 cannot possibly apply.

IR35 can only kick in if you are paid other than PAYE (dividends generally) and you own more than 5% of the share capital of the potential intermediary.