16 year old shareholder dividend question

[Deep]

Hi
Need some advice please.

A company is set up which holds a few properties.

Rental income of the properties is £30k/pa (for example)

A 16 year old is given 49% of shares

The 16 year old is full time student.

Is there anything stopping the 16 year old being paid £12750 (ie personal tax free allowance) in dividends per year? (On the assumption that no dividend tax will be triggered)

Would HMRC have any issue with this?

Thank you

[Sy1441]

Forgive my ignorance but would you not just pay that as PAYE assuming that there was no other PAYE income?

[Deep]

Sy1441 said:

Forgive my ignorance but would you not just pay that as PAYE assuming that there was no other PAYE income?

Hi
Yes, that's another option and would have the advantage that the PAYE would mean less profit to pay corporation tax on.
However my concern was I might have to justify what a 16 year old in full time education is actually doing for the company.

Thank you

[Puzzles]

as long as it's not an artificial arrangement

[Mr Pointy]

Deep said:

Yes, that's another option and would have the advantage that the PAYE would mean less profit to pay corporation tax on.
However my concern was I might have to justify what a 16 year old in full time education is actually doing for the company.

IT support or Social Media Manager/Creative Director?

Not much less flakey that thousands of wives who "do the books".

[Deep]

Puzzles said:

as long as it's not an artificial arrangement

Thanks.
How does one define an artificial arrangement?

[Strocky]

Deep said:

Thanks.
How does one define an artificial arrangement?

The fact you're asking answers your own question

[Deep]

Strocky said:

The fact you're asking answers your own question

Lol.
But there must be some kind of definition though?

[Mr Pointy]

Deep said:

Strocky said:

The fact you're asking answers your own question

Lol.
But there must be some kind of definition though?

Not necessarily, like a lot of HMRC tax stuff it's woolly. If you are running an IT consutancy & paying your wife £40k a year & she isn't Cisco certified you've probably got a problem. If you're a plumber & your wife collates the invoices, answers the phone & takes stuff to the accountants you're probably ok. Paying a 16 year old would definately raise a red flag but here are things they could reasonably be said to be doing, but do you feel lucky?

[Deep]

Mr Pointy said:

Not necessarily, like a lot of HMRC tax stuff it's woolly. If you are running an IT consutancy & paying your wife £40k a year & she isn't Cisco certified you've probably got a problem. If you're a plumber & your wife collates the invoices, answers the phone & takes stuff to the accountants you're probably ok. Paying a 16 year old would definately raise a red flag but here are things they could reasonably be said to be doing, but do you feel lucky?

Thanks.
There are indeed things he could be doing. I can make sure that he actually does them. The properties require insurance, maintenance etc.
No reason why the emails for that sort of thing go to his email and he replies....with my supervision of course

[wattsm666]

If the shares are given from a parent to Son, the Son’s dividend would still be taxed on the parents.

Income derived from a parent’s asset is still taxed on parents if given to a minor.

https://www.gov.uk/hmrc-internal-manuals/trusts-se...

Edited by wattsm666 on Monday 20th March 22:04

[Deep]

wattsm666 said:

If the shares are given from a parent to Son, the Son’s dividend would still be taxed on the parents.

Income derived from a parent’s asset is still taxed on parents if given to a minor.

https://www.gov.uk/hmrc-internal-manuals/trusts-se...

Edited by wattsm666 on Monday 20th March 22:04

I may have misunderstood but that link doesn't refer to companies?

[wattsm666]

You are right, but the settlements legislation catches this exact scenario. One of the examples explains it.

HMRC are wise to this hence this legislation

[Sheepshanks]

Deep said:

Hi
Need some advice please.

A company is set up which holds a few properties.

Rental income of the properties is £30k/pa (for example)

A 16 year old is given 49% of shares

Is it a new company? If it's existing shares transferred to the 16yr old then there may be CGT for the original owner of the shares.

There are schemes for kids school fees to effectively be paid by the kids themselves using dividends but I think the shares can't come from parents and may have to be held in a Trust. Maybe the proceeds could be used for any purpose?