dividends

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MrJuice

Original Poster:

3,300 posts

155 months

Friday 21st November 2014
quotequote all
Dividends are payable to shareholders, as we all know

What if I made my son a shareholder in my Ltd company that I own fully. Can he receive dividends without paying income tax?

Might be relevant that he's 14 weeks old...is there a minimum age before becoming a shareholder in a Ltd company?

Du1point8

21,604 posts

191 months

Friday 21st November 2014
quotequote all
MrJuice said:
Dividends are payable to shareholders, as we all know

What if I made my son a shareholder in my Ltd company that I own fully. Can he receive dividends without paying income tax?

Might be relevant that he's 14 weeks old...is there a minimum age before becoming a shareholder in a Ltd company?
I thought you could pay anyone dividends as long as provide one of two things.

a) they are a shareholder
b) they add something to the company and actually do something for the company.

So it might be difficult to prove your 14 weeks old is any of those as HMRC would be unimpressed.

however if you hire your O/H as a researcher and they did just even a little bit, you can have an arrangement to pay minimal salary (just to get on tax radar) and then make up the rest in dividends.

Eric will be along shortly to say Im talking bks...

gregf40

1,114 posts

115 months

Friday 21st November 2014
quotequote all
Du1point8 said:
I thought you could pay anyone dividends as long as provide one of two things.

a) they are a shareholder
b) they add something to the company and actually do something for the company.

So it might be difficult to prove your 14 weeks old is any of those as HMRC would be unimpressed.

however if you hire your O/H as a researcher and they did just even a little bit, you can have an arrangement to pay minimal salary (just to get on tax radar) and then make up the rest in dividends.

Eric will be along shortly to say Im talking bks...
I can tell you it if you want? wink

You don't need to add anything to the company whatsoever to be a shareholder and receive dividends.

Dr Interceptor

7,743 posts

195 months

Friday 21st November 2014
quotequote all
Yes it can be done... children can be directors and earn money. You get child actors for instance. Be careful what you do with the dividend though.

If you're paying the dividend into a trust fund for the child at a later date, then that's fine.

If you're hoping for the child to start paying the mortgage, I think the IR will see that as Income Shifting and tax you accordingly.

PurpleMoonlight

22,362 posts

156 months

Friday 21st November 2014
quotequote all
MrJuice said:
What if I made my son a shareholder in my Ltd company that I own fully. Can he receive dividends without paying income tax?
You can't use the personal allowance against Dividends if that is what you are trying to do.


MrJuice

Original Poster:

3,300 posts

155 months

Friday 21st November 2014
quotequote all
I'm just looking at ways of drawing money down in the short term without paying additional tax

I know I can't pay him on PAYE until he can actually do something for the business. I'm guessing aged 14 would be reasonable for that. Again, a reasonable and not inflated rate of pay

I'd prefer to be able to use the money I draw as dividend on his behalf. But if it must go in a trust fund, then so be it. We've almost ruled out prep school for him. But could such a trust fund be used to pay his school fees?

Du1point8

21,604 posts

191 months

Friday 21st November 2014
quotequote all
in the OP he's 14 weeks old, now you saying he's 14 years old?

You can employ parents/OHs/etc... like I say if they do something then you can do it.

I was looking at it when OH was on £30k a year and I was going to top it up to £42k using dividends as long as she did something for my trading company, she was already named as the company secretary.

MrJuice

Original Poster:

3,300 posts

155 months

Friday 21st November 2014
quotequote all
You don't have to do anything for a company to earn a dividend if that's what the directors choose to do with company funds. Obviously, you need to be a shareholder to earn dividends

Son is 14 weeks. I can't pay him PAYE. I will pay him PAYE when he is 14 years. If I'm still I'm business and the business can afford that.

anonymous-user

53 months

Friday 21st November 2014
quotequote all
the problem you need to avoid is that you can't give him the money and then you spend it

the way you have described your intent

"I'm just looking at ways of drawing money down in the short term without paying additional tax"

"I'd prefer to be able to use the money I draw as dividend on his behalf."

is almost surely going to be seen as a way of you not paying tax

you can fund a trust fund and the trust fund can pay the school fees but, usually, with just one set to pay, the costs of doing the trust properly would come close to outweighing the tax savings

are both you and the child's mother optimised for tax on money coming out of the company already?

Simpo Two

85,149 posts

264 months

Friday 21st November 2014
quotequote all
Dr Interceptor said:
Yes it can be done... children can be directors...
How does that sit with the legal responsibilities of directorship, as <18 years old is not legally responsible?

threesixty

2,068 posts

202 months

Friday 21st November 2014
quotequote all
Simpo Two said:
How does that sit with the legal responsibilities of directorship, as <18 years old is not legally responsible?
I don't know, but I don't see why being a director is relevant in this situation, you don't need to be a director to be a shareholder and take a dividend.

I'd be extremely wary of giving children a shares at 14weeks old, who knows what the future may bring? I've seen no end of trouble caused from poorly distributed shares in family businesses.

MrJuice

Original Poster:

3,300 posts

155 months

Friday 21st November 2014
quotequote all
JPJPJP said:
are both you and the child's mother optimised for tax on money coming out of the company already?
Not really. I need to pay her a small salary and take dividends out for her. She's not yet a shareholder but I'll make her a shareholder soon

I'm looking forward a few years. Right not there's not much spare cash in the business. Bit there could be well into six figures spare cash in a few years that the business doesn't need as cash flow. So I want to make plans to use that surplus for non core activities and draw some down without paying yet more tax.

Interesting comment about setting up costs of trusts. How much do these things cost?

MrJuice

Original Poster:

3,300 posts

155 months

Friday 21st November 2014
quotequote all
threesixty said:
I don't know, but I don't see why being a director is relevant in this situation, you don't need to be a director to be a shareholder and take a dividend.

I'd be extremely wary of giving children a shares at 14weeks old, who knows what the future may bring? I've seen no end of trouble caused from poorly distributed shares in family businesses.
I have and will always retain full control over the business, regardless of who owns it on paper. Maybe a bit of a brash statement but I do genuinely believe it to be true else I wouldn't be considering changing the ownership structure of my business which has taken a lot of time and effort to grow to what and where it is today

Seventy

5,500 posts

137 months

Friday 21st November 2014
quotequote all
http://www.hmrc.gov.uk/manuals/tsemmanual/tsem4300...

Explains a little more though not sure if 100% relevant.

98elise

26,376 posts

160 months

Friday 21st November 2014
quotequote all
Interesting thread.

I'm a Ltd Co Contractor and sole shareholder. My partner (as in "wife" not business partner) has a part time day job, but on Thursdays she does my books, raises invoices, files receipts, creates client expenses claims, reconciles the Banking etc. To date she has done this for free as money I draw pays the bills (ie its effectively joint money).

To date this has been fine as I've wanted to build a financial buffer in the company for sickness, time out of work etc. We now have that buffer in place so I'm interested in the most tax efficient (but legal!) method of taking more cash out of the company.

It sounds like I should start paying her for 1 day a week, plus add her as a shareholder?

Edited by 98elise on Saturday 22 November 00:05


Edited by 98elise on Saturday 22 November 00:11

theboss

6,878 posts

218 months

Friday 21st November 2014
quotequote all
98elise said:
Interesting thread.

I'm a Ltd Co Contractor and sole shareholder. My partner (as in "wife" not business partner) has a part time day job, but on Thursdays she does my books, raises invoices, files receipts, creates client expenses claims, reconciles the Banking etc. To date she has done this for free as money I draw pays the bills (ie its effectively joint money.

To date this has been fine as I've wanted to build a financial buffer in the company for sickness, time out of work etc. We now have that buffer in place so I'm interested in the mosy tax efficient (but legal!) method of taking more cash out fo the company.

It sounds like I should start paying her for 1 day a week, plus add her as a shareholder?
Yes - I'd pay her a small salary and split your shareholding if I were you... that's what I've always done (my wife doesn't have any other income).

sumo69

2,164 posts

219 months

Friday 21st November 2014
quotequote all
Interesting - nobody has mentioned the CGT or IHT issues of giving some of a controlling shareholding away as a gift?

OP - ask your accountant!

David

PurpleMoonlight

22,362 posts

156 months

Saturday 22nd November 2014
quotequote all
Also, you might think that your wife owning half your business is a good idea now but you wont if she is ever not your wife anymore ....

98elise

26,376 posts

160 months

Saturday 22nd November 2014
quotequote all
PurpleMoonlight said:
Also, you might think that your wife owning half your business is a good idea now but you wont if she is ever not your wife anymore ....
Its a good point, but in my case my business relies entirely on my labour. Its worth nothing other than the bank balance if I'm not working there smile

worsy

5,776 posts

174 months

Monday 24th November 2014
quotequote all
PurpleMoonlight said:
MrJuice said:
What if I made my son a shareholder in my Ltd company that I own fully. Can he receive dividends without paying income tax?
You can't use the personal allowance against Dividends if that is what you are trying to do.
Yes you can. In practice though, you would pay salary to the same PA level as this would reduce the CT bill.