New Dividend rules.
Discussion
Working through some solutions/options with my accountant to manage our personal tax liability.
Situation is of a small Limited company with 2 shares and 2 shareholders (Husband and wife).
Currently 1 of the shareholders is a lower rate tax holder and the 2nd is a higher rate tax payer so once they are paid more than £5k dividend it gets taxed at that rate.
We're wanting to pay 1 shareholder £4999 and the other the balance but whilst they both have equal shares we can't.
So current thoughts of a plan is;
1. Call a general meeting; issue a bonus "A" share for each ordinary share held. (so each shareholder has 1 ordinary and 1 "a" share)
2. Notify Companies House of the share issue.
3. Hold a directors' meeting to transfer one ordinary share from #2 to #1 and one "A" share from #1 to #2. (which would leave #1 with 2 ordinary and #2 with 2 "A" shares.
4. Notify Companies House of the share change.
5. Declare different level of dividends to "ordinary" and "A" shareholders.
Is this the best/easiest way to do things?
Situation is of a small Limited company with 2 shares and 2 shareholders (Husband and wife).
Currently 1 of the shareholders is a lower rate tax holder and the 2nd is a higher rate tax payer so once they are paid more than £5k dividend it gets taxed at that rate.
We're wanting to pay 1 shareholder £4999 and the other the balance but whilst they both have equal shares we can't.
So current thoughts of a plan is;
1. Call a general meeting; issue a bonus "A" share for each ordinary share held. (so each shareholder has 1 ordinary and 1 "a" share)
2. Notify Companies House of the share issue.
3. Hold a directors' meeting to transfer one ordinary share from #2 to #1 and one "A" share from #1 to #2. (which would leave #1 with 2 ordinary and #2 with 2 "A" shares.
4. Notify Companies House of the share change.
5. Declare different level of dividends to "ordinary" and "A" shareholders.
Is this the best/easiest way to do things?
Marcellus said:
Not "purely" it's also to be more reflective that shareholder #1 spends 100% of their time working for the company whereas shareholder #2 now works elsewhere but historically did work for the business.
The government is trying to "Crack down" on the use of dividends as a method of payment for "work"The alphabet share strategy is almost certainly within the law BUT it is the sort of thing the revenue are trying to stop so they may start poking around.
The would prefer people to get paid the going rate for their "Work" and then take the profits as dividends.
Obviously what they would "prefer" is not a relevant as what the legislation will allow.
Yes. If one shareholder requires lower dividends - just make sure they have fewer shares.
Shares also indicate ownership - so it isn't always wise to have a significant element of ownership of the company in the hands of someone who isn't much involved in it.
Is the missus a director as well?
Shares also indicate ownership - so it isn't always wise to have a significant element of ownership of the company in the hands of someone who isn't much involved in it.
Is the missus a director as well?
It's been some years since my accountant suggested it, but I was told that one shareholder (the higher rate payer) can waive some or all of the dividend, as long as there was sufficient retained profits to pay it. It means you can't distribute all retained profits though to the lower rate payer, the waived dividends remain in the company.
And HMRC are twitchy about waived shares too.
The thing about all these subterfuges is that those who wish to want to make use of them must make sure they go through all the right processes to show that -
a) the payment is genuinely a dividend
b) any waivers are backed by the required paperwork
The thing about all these subterfuges is that those who wish to want to make use of them must make sure they go through all the right processes to show that -
a) the payment is genuinely a dividend
b) any waivers are backed by the required paperwork
Marcellus said:
Eric Mc said:
Is there a reason why she doesn't?
Their job already takes them well into top rate tax band!Of course, her dividends (over £5,000) will also be taxed at the higher rates of tax pertaining to dividends.
So, the question has to be, why IS she a director/shareholder of the company?
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