S660: Latest? Plus some advice needed

[Swamp Thing]

Everyone,
I could do with the combined wealth of experience on this board to advise me on the following:

1. What is that latest position with the government’s tinkering, sorry, redrafting of S660 legislation, following Arctic Systems?
2. I am currently 100% ltd company shareholder, but am thinking of reallocating 20% shareholding to my partner, plus providing her a basic salary (£7.5K-ish). In return she will manage all of the company financial affairs, books, returns etc etc. As the business grows, she will take a more proactive role, marketing the business (her background is marketing) with a view to taking on business partners.

Points to note:
1. My partner is currently a higher rate taxpayer. I know there is currently no financial advantage in what I am proposing, however I do have other specific reasons for bringing her in.
2. At some time in the future I may marry.
3. At some time in the future my partner/wife may go part-time in her other job, or cease that job entirely.

Please, no chorus of disapproval from know-alls on the business front (e.g. “you can’t do that, you’ll break HMRC rules!”) or from divorcés on the home front (e.g. “you must be mad, when you split up she’ll take at least 50%!”) etc etc.

What I’m looking for is your objective feedback on my proposed setup, and my chances in view of the fact that legislative redrafting is still underway. I’m trying to stay within current draft legislation which states that “new rules will not apply if there is a "genuine commercial arrangement" and HMRC believes tax reduction is “not the main or one of the main purposes” of the arrangement”.

Ta muchly,

Swamp

[malvolio]

Nothing is happening. S660 is dead in the water in the way it was applied to the Arctic case and there is in practice no reason not to split shareholding between spouses. If the other shareholder is not your spouse, S660a never applied anyway.

Equally fif the partner is doing real work fo r hte company and paid a commensurate salsry for it, there are no problems.

The redrafted Family Business Tax is still out there but has been shelved for the last two budgets and was not mentioned in the Queen's Speech. Introducing that in the PBR this close to an election and seriously upsetting some 4.5 million voters would be suicidal (although this is Gay Gorgon we're talking about here...)

So basically, the field is clear.

[Maslins]

Bear in mind if this is a girlfriend rather than a wife, then any transfers of assets are not exempt from CGT. You'll need to estimate a value for the 20% shareholding at the point of transfer, and ideally get your partner to physically pay that to you for the shares. Depending upon what that value is it may or may not be covered by your ~£10k annual exemption.

Aside from that, I think your main concerns do not really apply. Labour proposed some income shifting rules following the Arctic case, which were thankfully shelved, and I'm not aware of anything being declared since then.

[Swamp Thing]

Bear in mind if this is a girlfriend rather than a wife, then any transfers of assets are not exempt from CGT. You'll need to estimate a value for the 20% shareholding at the point of transfer, and ideally get your partner to physically pay that to you for the shares. Depending upon what that value is it may or may not be covered by your ~£10k annual exemption.

The company was incorporated with 100 nominal shares @ £1 each. So are you saying she pays £20 for her allotment?

Tks.

[Hex]

The company was incorporated with 100 nominal shares @ £1 each. So are you saying she pays £20 for her allotment?

Tks.

No - he's saying you work out the value of all the assets in the company (including account balances) and she has to pay you 20% of that to buy the shares.

An alternative would be to wind your existing company up and start another with her having 20% of the new one. As the new one has no assets when it starts up then she could just chuck in the £20 nominal value.

[ASB]

The company was incorporated with 100 nominal shares @ £1 each. So are you saying she pays £20 for her allotment?

Tks.

For an untraded (i.e. private) company where income is generated from the services of yourself it is probably reasonable just to apportion the shareholders funds as the current value (i.e. what they would be worth on liquidation). HMRC does have an office (can't remember where) that can offer advice if you are uncertain as to the transfer value to apply.

[Swamp Thing]

Thanks to all who replied - very helpful info

[THEPUMA]

Bear in mind if this is a girlfriend rather than a wife, then any transfers of assets are not exempt from CGT. You'll need to estimate a value for the 20% shareholding at the point of transfer, and ideally get your partner to physically pay that to you for the shares. Depending upon what that value is it may or may not be covered by your ~£10k annual exemption.

This issue is easily avoided by making a holdover relief claim.