Gifting Shares - NOT to Spouse

[CcontractPar]

Hi There,

I have tried to locate a thread on this but couldn't find one - they pretty much all focus on spouse directors, shareholders, etc.

I am looking to allocate my Mother (different surname now, via gift) a 25% shareholding in my relatively new Ltd company (16 months old, minimum capital <£5k). Then, obviously, subsequently pay her 25% of all dividends paid from the company.

I need to ascertain whether, on the face of it, this is completely above board? I understand (via the settlements legislation) that if the monies were, somehow, to be redirected to myself it would be a different kettle of fish but they won't. Without wanting to sound naive, the account is in her name, her address, she has all the accesses (online, card, branch, etc). If this were to be proven, surely it has no tax benefit on my self as the money I'm, effectively, giving away would outweigh any additional taxes I'd face on paying the 25% to myself and potentially breaching higher rate taxes.

Thanks in Advance!!

[northernladuk]

Dig through this lot. Couple of wives but plenty about family....

https://www.google.co.uk/search?q=gi...sm=93&ie=UTF-8

[Martin at NixonWilliams]

Hi There,

I have tried to locate a thread on this but couldn't find one - they pretty much all focus on spouse directors, shareholders, etc.

I am looking to allocate my Mother (different surname now, via gift) a 25% shareholding in my relatively new Ltd company (16 months old, minimum capital <£5k). Then, obviously, subsequently pay her 25% of all dividends paid from the company.

I need to ascertain whether, on the face of it, this is completely above board? I understand (via the settlements legislation) that if the monies were, somehow, to be redirected to myself it would be a different kettle of fish but they won't. Without wanting to sound naive, the account is in her name, her address, she has all the accesses (online, card, branch, etc). If this were to be proven, surely it has no tax benefit on my self as the money I'm, effectively, giving away would outweigh any additional taxes I'd face on paying the 25% to myself and potentially breaching higher rate taxes.

Thanks in Advance!!

I assume your mother is not involved in the running of the company and that she would not have to pay any additional tax on the dividends?

Assuming the above is correct, this would still be caught by the settlements legislation in my opinion. There are many factors to consider, not just whether you have access to the funds.

If you are caught, you would be taxed on the whole of the dividend regardless of how much of the dividend was paid to you.

I hope this helps.
Martin

[DirtyDog]

Most people on here will tell you that you would be caught by the settlements legislation, particularly since you are gifting.

TheCyclingProgrammer will be along presently to tell you that you aren't.

[Project Monkey]

Ask yourself why you want to do this instead of taking all the dividends yourself and then just giving her the cash after you've paid the necessary income tax.

The answer to this question should help you understand if it's likely to be legitimate.

[Clare@InTouch]

I assume your mother is not involved in the running of the company and that she would not have to pay any additional tax on the dividends?

Assuming the above is correct, this would still be caught by the settlements legislation in my opinion. There are many factors to consider, not just whether you have access to the funds.

If you are caught, you would be taxed on the whole of the dividend regardless of how much of the dividend was paid to you.

I hope this helps.
Martin

I agree with Martin, especially if this dividend income indirectly benefits you because you no longer have to give her cash/pay her bills/support her in any way/enables her to spend less of her own money hence saving it for when it all passes back to you via inheritance.

[russell]

Ask yourself why you want to do this instead of taking all the dividends yourself and then just giving her the cash after you've paid the necessary income tax.

The answer to this question should help you understand if it's likely to be legitimate.

The same can be said for your wife, why would you give her dividends rather than post income tax.

[northernladuk]

The same can be said for your wife, why would you give her dividends rather than post income tax.

There is some argument that the wife supports the husband in running a business which can often take up many hours above and office hours, includes risk which affects both parties and family finances can be squeezed with the start up/risk so it could be said the wife is implicitly involved in the business so could be argued to warrant some concessions.

In a proper scenario this would make some sense. With a contractor wife it is obviously just a tax mule but they haven't been able to close that loop yet.

[Clare@InTouch]

The same can be said for your wife, why would you give her dividends rather than post income tax.

The difference is that there are different tax rules for married couples than there are for everyone else.

[Project Monkey]

The same can be said for your wife, why would you give her dividends rather than post income tax.

True, but as you already know wives come with special exemptions.