splitting company shares

[andy]

I am confused on whether split my company shares with my missus.
My accountant say to keep 100% shares with myself because of arctice case. s360. But the benefit i can see is that i could draw more dividend if i split the shares.
What do the nice people here advise.

[Ardesco]

You can draw the same amount of dividend either way as far as i'm aware.

The positive to giving your wife shares would be that you can utilise her tax allowance as well when it comes to getting money out of your company, but if she has a job it may well not be worth doing this (All depends on how much she earns).

The arctic case should be lost by the IR (They have already lost once and are now appealing) so that shouldn't really beto much of a worry.

[Gonzo]

Shame on you!

I am confused on whether split my company shares with my missus.
My accountant say to keep 100% shares with myself because of arctice case. s360. But the benefit i can see is that i could draw more dividend if i split the shares.
What do the nice people here advise.

Trying to use perfectly legal methods to minimise your tax bill is the sort of thing that incurs Gordo's wrath and results in new legislation being speedily introduced or arcane old ones being resurrected when he gets to hear about it!

As you do not currently have that structure I would wait until the S660 thing is ruled upon next summer if I were you, but then again, IANAA etc etc.

[Newby]

Make hay whilst the sun shines! Gordo hasnt shut the loop hole yet. I doubt even if they win the appeal that they will go back to claim taxes.

[malvolio]

Make hay whilst the sun shines! Gordo hasnt shut the loop hole yet. I doubt even if they win the appeal that they will go back to claim taxes.

Yes, they will. The legislation they are trying to apply is over 50 years old, so there's no problem at all going back over your last six years assessments. They are spendng close to £500k on the appeal to recover a debt of just over £7k; they wouldn't be doing that if they had no intention of chasing other victims once they've won.

[andy]

Thanks Guys
My wife is my company secretary and draws minimum salary.
If is split 50% shares with her can i withdraw same amount of dividend as myself without falling into high tax bracket ?
Does this type of split will make me somehow flash up on gordo's radar.

[boredsenseless]

You can draw the same amount of dividend either way as far as i'm aware.

The positive to giving your wife shares would be that you can utilise her tax allowance as well when it comes to getting money out of your company, but if she has a job it may well not be worth doing this (All depends on how much she earns).

The arctic case should be lost by the IR (They have already lost once and are now appealing) so that shouldn't really beto much of a worry.

Bear in mind of course that arctic lost as well in previous hearings, appealled and now we are where we are. It is by no means a foregone conclusion.

You have to take a calculated view of the situation and decide if you feel s660 will remain an issue in the future.

However in my view, if you opt to keep 100% now while s660 is ongoing then suddenly split once if it is won by arctic then aren't you going to have some difficult questions around :

Hector : so you thought your arrangement was s660 did you?
You : Yeah 'spose i did
Hector : but now as we lost arctic you changed to 50/50 split?
You : Yeah loads a dosh to me!!

Hector bends you over and takes what he thinks is his

[XLMonkey]

I'm doing a share split at the moment with the wife buying into the company. It is a calculated risk, because as the other posters have pointed out, the Arctic case has yet to be finalised.

However, the risk isn't quite as extreme as all that - since the Court of Appeal ruled in favour of Arctic systems, you are entitled to assume that you are in the right and HMRC are in the wrong - for the moment at least. So, the worst that can happen if you do it now is that your other half becomes liable for the 25% rate of tax on the dividend that she has taken.

...but, if you wait around for the case to be heard in the House of Lords, then you will lose the opportunity to take advantage of the situation in this tax year (because you can't give the dividend retrospectively). So, there is a downside to waiting as well.

[ASB]

So, the worst that can happen if you do it now is that your other half becomes liable for the 25% rate of tax on the dividend that she has taken.

Nope. The worst that can happen is rather different.

1) There may be charges backwards through time. If Arctic is lost then I expect if you play by the "new rules" i.e. declare the income on *your* tax return then they will not go back. If you continue to play by the old rules - i.e. continue to declare the income on your partners return then they are likely to go back the 6 years they can, seek penalties and interest. If Arctic is won expect a specific change anyway...

2) The charge is assessed on the settlor. The income is reclassified to the settlor and taxed accordingly. This means that there is laible to be full tax paid on it.

3) The recipient of the income may (should even) get relief on it. However if a period of time has elapsed since thier return was filed (now erroneously because income was on it which shouild have been on somebody elses) the it may not be possible to reopen this return to actually get the (now overpaid) tax back.

[turbo]

Nope. The worst that can happen is rather different.

1) There may be charges backwards through time. If Arctic is lost then I expect if you play by the "new rules" i.e. declare the income on *your* tax return then they will not go back. If you continue to play by the old rules - i.e. continue to declare the income on your partners return then they are likely to go back the 6 years they can, seek penalties and interest. If Arctic is won expect a specific change anyway...

Like malvolio said, they're not spending 500k on the Arctic case for nothing. They're bound to try and recover as much tax as possible regardless of what you do now.

turbo