Pre-Budget: Income Shifting

[kryten22uk]

Is there any hint yet on whether there will be an "allowance" or lower limit below which we will be able to continue to provide dividends to the "wife"?

It currently seems like ALL dividends paid to the partner will be taxed as if they were earned by the fee-earner. But what about a reasonable level of recompense in return for secretarial/admin work for the company? I understand the reason behind stopping people offloading £40k onto their house-bound partner in order to take advantage of the 0% tax on divs, but surely a market rate of say £15k for part time secretarial costs is reasonable?

[thewave]

kryten22uk said:

Is there any hint yet on whether there will be an "allowance" or lower limit below which we will be able to continue to provide dividends to the "wife"?

It currently seems like ALL dividends paid to the partner will be taxed as if they were earned by the fee-earner. But what about a reasonable level of recompense in return for secretarial/admin work for the company? I understand the reason behind stopping people offloading £40k onto their house-bound partner in order to take advantage of the 0% tax on divs, but surely a market rate of say £15k for part time secretarial costs is reasonable?

I read anything like this as being able to justify what you're distributing, it's all about having a reasonable arguement to present to HMRC should a query arise.

[kryten22uk]

thewave said:

I read anything like this as being able to justify what you're distributing, it's all about having a reasonable arguement to present to HMRC should a query arise.

But its sounds like any dividends paid to a partner will (or quite likely to) raise an HMRC investigation. And I wouldnt want to raise one as you never know what else they may decide you need to pay. Far better to be under an official minimum dividend limit and hence not be on the radar.

Another thought that I had was, if the company is not solely owned within the marriage (ie there are shareholders other than the husband&wife) does that mean that any dividends received are legitimately individual? If so one could sell a share to an outside party, in order to fall outside the husband-wife team only banner.

[Olf]

kryten22uk said:

thewave said:

I read anything like this as being able to justify what you're distributing, it's all about having a reasonable arguement to present to HMRC should a query arise.

But its sounds like any dividends paid to a partner will (or quite likely to) raise an HMRC investigation. And I wouldnt want to raise one as you never know what else they may decide you need to pay. Far better to be under an official minimum dividend limit and hence not be on the radar.

Another thought that I had was, if the company is not solely owned within the marriage (ie there are shareholders other than the husband&wife) does that mean that any dividends received are legitimately individual? If so one could sell a share to an outside party, in order to fall outside the husband-wife team only banner.

You could sell a share but the value raised by selling the share if it were owned by you or your wife would then be subject to CGT!

[jamesb300]

The budget report seems to say that "Income from employment, interest on savings and any other source will not be affected.”

For an IT contractor, does this mean that if you needed to pay your spouse when you had reached your 40% threshold, you would be better off "employing" the spouse as a salaried company secretary, especially if she was the Limited Company secretary anyway?

James.

[kryten22uk]

Maybe, but then she'd be subject to Employees NI, and the company subject to Employers NI. Not to mention the additional legal/redtape headache of having an employee.

[Gordon Brown]

kryten22uk said:

Is there any hint yet on whether there will be an "allowance" or lower limit below which we will be able to continue to provide dividends to the "wife"?

It currently seems like ALL dividends paid to the partner will be taxed as if they were earned by the fee-earner. But what about a reasonable level of recompense in return for secretarial/admin work for the company? I understand the reason behind stopping people offloading £40k onto their house-bound partner in order to take advantage of the 0% tax on divs, but surely a market rate of say £15k for part time secretarial costs is reasonable?

If can't just be 'spouses' it must apply to all dividends, which sounds very unlikely.

I think anyone who can't show their spouse is a 'fee-earner' rather than an ornament and convenient tax dodge having had 3 years notice of this case is a bit slow off the mark IMHO.

[Olf]

Gordon Brown said:

kryten22uk said:

Is there any hint yet on whether there will be an "allowance" or lower limit below which we will be able to continue to provide dividends to the "wife"?

It currently seems like ALL dividends paid to the partner will be taxed as if they were earned by the fee-earner. But what about a reasonable level of recompense in return for secretarial/admin work for the company? I understand the reason behind stopping people offloading £40k onto their house-bound partner in order to take advantage of the 0% tax on divs, but surely a market rate of say £15k for part time secretarial costs is reasonable?

If can't just be 'spouses' it must apply to all dividends, which sounds very unlikely.

I think anyone who can't show their spouse is a 'fee-earner' rather than an ornament and convenient tax dodge having had 3 years notice of this case is a bit slow off the mark IMHO.

Well there's about 600 MP's for starters.