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Rakhi Vasavada
Rakhi Vasavada, Financial Advisor
Category: Finance
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Experience:  Attorney and Financial Expert. Have specialization in Financial Laws.Practice experience of over 13 years
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I need advice on Limited company shareholders and S660 leg

Customer Question

I need advice on Limited company shareholders and S660 legislation.
Submitted: 2 years ago.
Category: Finance
Expert:  Rakhi Vasavada replied 2 years ago.
Dear Friend,

Hello and welcome. Thank you for providing an opportunity to assist you.

Can you please elaborate a little more on your question ? This would help me assist you better.

Warm Regards
Customer: replied 2 years ago.

Hello


 


I am director and 100% shareholder of my own limited company. I would like to give ordinary shares to my current partner (we are not married), she has a part time job with very low income and I would like to pay her dividends from my company to maximise her tax free dividend allowance. I know this is a common set up for married couples but is it legal under the S660 legislation? I have been reading about the Arctic case on the net but it's not clear on whether the outright gift in shares need to go specifically to your wife or can be a partner also.


 


Are you able to advise?


 


Thanks

Expert:  Rakhi Vasavada replied 2 years ago.
Dear XXXXXo,

Hello and welcome again. Thank you for your reply.

Yes, this law deals with splitting of Incomes between couples in order to become more tax efficient. To put it in other words, to save tax by shifting of incomes.

This has come under cloud by some blatant and open misuse of such provisions. Especially the Artic case that you have been referring to.

Coming to your point, so far as my interpretaion goes, both spouse and partners are permissible. However, the key point is that this should not be solely intended for the purpose of avoiding taxes, which is the main reason HMRC puts such entities under scanner.

Note that you may issue shares in your company to anyone you choose. All shareholders are entitled to recieve dividend income from post-tax profits of the company in the same ratio as the shares owned. Since dividends represent a tax efficient method of withdrawing funds from a company.

However, if the spouse, or partner, is a director of the company and they play a significant role in the business then their status as a shareholder is of less concern. The shareholder and director who is not the main fee earner should hold a clearly identifiable role in the company to justify earning dividends.

If we speak about the Artic case in particular, there as well, should be treated as Geoff Jones’ income, and taxed accordingly. But HMRC lost the case, and the ruling has provided married contractors with certainty about the settlement legislation’s exemption for spouses and civil partners.

As long as the shares are ordinary class shares, this means a fee earning contractor can jointly own a limited company with their non-fee-earning spouse or civil partner, split the income from the ordinary shares, and have no fear that HMRC will attempt to tax all the income as the contractor’s.

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Customer: replied 2 years ago.

Thanks most useful.


 


I have however some other questions ref. this topic, my wife currently does small admin tasks (accounting spreadsheet, phone calls handling , archiving documents, bank commissions etc) for the company and I am paying her a salary of 600/month. I cannot justify giving her a directorship but I was thinking of awarding a proportion of shares as mentioned before which it won't be on a commercial basis as such but more as outright gift.


 


In the unlikely scenario that HMRC will challenge my shares allocation with an investigation are you able to tell me, roughly, what would be the tax implications assuming they will challenge the dividends paid to her? I assume they will want me to pay dividend tax + penalties + interests on the number of years they have been outstanding for. Won't they?


 


kindly advise further


 


cheers


 


 


Marco


 


 


 

Expert:  Rakhi Vasavada replied 2 years ago.
Dear XXXXXo,

Yes, you have got it right. If you award your wife some shares as a gift, it would certainly look in the eyes of HMRC as an deliberate attempt to evade taxes and attempt to splitting of income.

Yes, if they come after you, they can certainly hold you liable of interest plus penalties as applicable.

If your purpose is solely to reduce taxes, I do not think that you should do this.

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

I am sure this would help.


Warm Regards,

Customer: replied 2 years ago.

another question, sorry maybe it looks silly but what is intended by "civil partners" under UK law, same sex relationship or also boyfriend-girlfriend relationships?

Expert:  Rakhi Vasavada replied 2 years ago.
Dear XXXXXo,

Hello and welcome again.

This is bit of a legal question, but let me try and give you general guidance. This would include same sex relationship only. Kindly refer the following link for clear definition.

http://www.cornwall.gov.uk/advice-and-benefits/civil-partnerships/what-is-civil-partnership/?page=14470


I am sure this would help.

 

You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question.

Warm Regards,

Rakhi Vasavada, Financial Advisor
Category: Finance
Satisfied Customers: 4526
Experience: Attorney and Financial Expert. Have specialization in Financial Laws.Practice experience of over 13 years
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Customer: replied 2 years ago.

thanks for your help

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Expert:  Rakhi Vasavada replied 2 years ago.
Dear Marco,

You are most welcome.

It was total pleasure assisting you.

Warm Regards

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