Question for the powerfully built amongst us
Discussion
Better split of Divs so we can draw more out without being taxed on it? There are funds sat in the business account "not working hard enough" 
At the moment if we draw more afaik I'll start to get taxed as it will take me (80% share) over the limit where tax starts to be applied. I understand the upside just not sure if there is a down.
TX.
At the moment if we draw more afaik I'll start to get taxed as it will take me (80% share) over the limit where tax starts to be applied. I understand the upside just not sure if there is a down.TX.
Obviously, if one person has lower overall income from outside of the company, then there would be scope to offer that person more income from the company - especially if they had a fair bit of "headroom" before they started having to pay higher rate tax.
The down side is that in attempting to give them more share of income, you are also giving them more share of ownership of the company - which may be something you could regret later.
HMRC is not mad keen on one person "settling" income that they think should be taxable on that person on to another related/connected person. They call this "income shifting" and a few years ago they had a real go at stopping this practice (read up on The Arctic Systems Case). On this occasion, HMRC failed but it doesn't mean they like the practice.
The down side is that in attempting to give them more share of income, you are also giving them more share of ownership of the company - which may be something you could regret later.
HMRC is not mad keen on one person "settling" income that they think should be taxable on that person on to another related/connected person. They call this "income shifting" and a few years ago they had a real go at stopping this practice (read up on The Arctic Systems Case). On this occasion, HMRC failed but it doesn't mean they like the practice.
Eric - SWMBO is the other Director and we are married etc thus we split all our worldly possessions 50/50 of course which I assume includes the business regardless of our share split eg even though it's 80/20 today not 50/50 or close to 50/50? If true then perhaps I'm not really handing anything over as she has first dibs anyway? Good point though so thanks for that.
TX.
TX.
Terminator X said:
Eric - SWMBO is the other Director and we are married etc thus we split all our worldly possessions 50/50 of course which I assume includes the business regardless of our share split eg even though it's 80/20 today not 50/50 or close to 50/50? If true then perhaps I'm not really handing anything over as she has first dibs anyway? Good point though so thanks for that.
TX.
If there are no concerns regarding ownership of the company, the by all means transfer some shares to her. HMRC are still smarting after their defeat in Arctic Systems and you never know when they might have another go in this area,.TX.
No tax implications in transferring assets between husband and wife - this is exempt from capital gains tax. It makes perfect sense to ensure that both husband and wife use their full personal allowances and basic rate tax bands. Plus if you ever sell the company you make sure that you both have the maximum Entrepreneurs' Relief available.
Dividend waivers allow the dividend amounts paid out to vary from what would have been paid on a strict shareholding basis.
As ever, HMRC are aware that such waivers are used to "income shift" and they don't really like them. However, they don't seem to tackle this issue too often. I've never had a problem when one of my clients has used this technique.
As ever, HMRC are aware that such waivers are used to "income shift" and they don't really like them. However, they don't seem to tackle this issue too often. I've never had a problem when one of my clients has used this technique.
Terminator X said:
Eric - SWMBO is the other Director and we are married etc thus we split all our worldly possessions 50/50 of course which I assume includes the business regardless of our share split eg even though it's 80/20 today
TX.
Um, eh. Can you explain that? I would have thought it would have been half of 80 and half of 20? No?TX.
Genuine question!
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