Changing wifes shareholding

[kempc23]

Currently my wife has a 15% shareholding in my ltd co. It was set at this level so that her earnings would go up to the higher rate tax boundary. This tax year she will be earning a bit less, as she is pregnant, so will only be working half the year. The following year she will not be working at all, although will still have some income.

I would like to change the shareholdings to something like this:

April 2012: 70/30
April 2013: 60/40

Is there anything wrong with increasing her shareholding gradually like this?

[eek]

Currently my wife has a 15% shareholding in my ltd co. It was set at this level so that her earnings would go up to the higher rate tax boundary. This tax year she will be earning a bit less, as she is pregnant, so will only be working half the year. The following year she will not be working at all, although will still have some income.

I would like to change the shareholdings to something like this:

April 2012: 70/30
April 2013: 60/40

Is there anything wrong with increasing her shareholding gradually like this?

A similiar question was asked last week. http://forums.contractoruk.com/accou...ear-dodgy.html but didn't get any responses.

Personally I think it will look dodgy but what does your accountant say? You do have one don't you.

[kempc23]

Yes I have an accountant. Its Sunday, hence why I am asking here instead of contacting him. I personally assumed that as a married couple we can organise our affairs as we wish, but will need to get confirmation on that really.

[radish2008]

How did you calculate the split ?

Currently my wife has a 15% shareholding in my ltd co. It was set at this level so that her earnings would go up to the higher rate tax boundary. This tax year she will be earning a bit less, as she is pregnant, so will only be working half the year. The following year she will not be working at all, although will still have some income.

I would like to change the shareholdings to something like this:

April 2012: 70/30
April 2013: 60/40

Is there anything wrong with increasing her shareholding gradually like this?

Hi - I'm just in processing of doing this kind of split.

Currently my wife works part time in a school and earns 11k gross.

Presuming I invoice say £100k I was thinking of calculating the split this way:

30k of wife's allowance to take her to higher rate tax.

30k as percentage of 100k is 30% so the split would be 70 me 30 wife.

Does that sound right ?

[Nixon Williams]

Not something that we would advise.

If you are looking to change the shareholdings in the company between yourself and your spouse more than once then you may run into problems if you were to ever be investigated by HMRC as the spousal gift exemption may not apply.

HMRC may try and argue the shares that are being transferred are indeed a right to income because there is the expectation to receive the dividends if the underlying reasoning behind the transfer to ensure one or both shareholder(s) are to remain basic rate tax payer(s).

Alan

[psychocandy]

Not something that we would advise.

If you are looking to change the shareholdings in the company between yourself and your spouse more than once then you may run into problems if you were to ever be investigated by HMRC as the spousal gift exemption may not apply.

HMRC may try and argue the shares that are being transferred are indeed a right to income because there is the expectation to receive the dividends if the underlying reasoning behind the transfer to ensure one or both shareholder(s) are to remain basic rate tax payer(s).

Alan

Yeh. I thought that. If you change the shareholdings every year then surely it does look like your changing to avoid higher rate tax.

But then again, surely this is a grey area? After all, if you decide to leave the shareholdings as they are because you 'might' get investigated then potentially its going to cost a lot in tax....

[psychocandy]

Not something that we would advise.

If you are looking to change the shareholdings in the company between yourself and your spouse more than once then you may run into problems if you were to ever be investigated by HMRC as the spousal gift exemption may not apply.

HMRC may try and argue the shares that are being transferred are indeed a right to income because there is the expectation to receive the dividends if the underlying reasoning behind the transfer to ensure one or both shareholder(s) are to remain basic rate tax payer(s).

Alan

Once ever? Or once every few years?

[Greg@CapitalCity]

Once ever? Or once every few years?

What would look like it triggers S660? One year, three years?? It has not been tested, and it would be less than ideal for you to be the first case to go forward. It really is impossible to say, and I don't think you will find an accountant that will give you an actual number (which is strange for an accountant ).

[JamJarST]

Hi - I'm just in processing of doing this kind of split.

Currently my wife works part time in a school and earns 11k gross.

Presuming I invoice say £100k I was thinking of calculating the split this way:

30k of wife's allowance to take her to higher rate tax.

30k as percentage of 100k is 30% so the split would be 70 me 30 wife.

Does that sound right ?

So you want to earn £70k and pay higher rate tax on the portion over £42k??

[Nixon Williams]

Yeh. I thought that. If you change the shareholdings every year then surely it does look like your changing to avoid higher rate tax.

But then again, surely this is a grey area? After all, if you decide to leave the shareholdings as they are because you 'might' get investigated then potentially its going to cost a lot in tax....

My advice would to decide on a split when the company is formed and then leave it.

Every case is different but if the spouse becomes liable for higher rate tax then this is tax the other spouse would probably have paid in any case.

The ability to split the dividends is a 'bonus' in any case so I would not get too worked up about the split once it has been decided on.

Alan