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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5116
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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If children are shareholder in a company can you give them

Customer Question

If children are shareholder in a company can you give them tax free dividends ?
Every ten years there is 6% tax on the trust.
6% of what ?Income or the asset value.
Submitted: 2 years ago.
Category: Tax
Expert: replied 2 years ago.
Hello and welcome to the site. Thank you for your question.Dividends are chargeable to income tax and there are changes to how dividends will be taxed wef 6 Apr 2016.Any one would be entitled to receive dividends free of tax up to a limit of £5,000. there will be a dividends allowance from next tax year. Dividends received in excess of this amount would be subject to income tax whether the recipient is a child or an adult.More information of this can be found here 6% tax on trust - are you referring to it in the context of inheritance tax. If so, it is maximum of 6 % on assets transferred out of the a trust. Mor information on it can be found here under The Inheritance Tax exit charge I hope this is helpful and answers your question.If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.
Customer: replied 2 years ago.
there is a ten yearly charge on a trust.And I am not sure how it works.
If you are not taking the assets out but just receiving the dividends,do you still have to pay tax?
Or if i put property in a trust and the rent is given for the use of their school fees, do they have to pay tax?
My main aim is to use the money for school fees.
trust would be ideal for a minor i think but from what you say there is 10 yearly tax only on exit. Am I right?
Expert: replied 2 years ago.
Thank you for your reply.Any income received by the trust would be chargeable to income tax. This is covered here The exit tax only applies to assets withdrawn in the context of inheritance tax. I hope this is helpful.
Customer: replied 2 years ago.
I want to know about trust charges.
every ten years there is 6% charge. what is it on?
income, asset or only on exit from the trust
Expert: replied 2 years ago.
Thank you for your reply.Having assets in a trust has inheritance tax implications. These are clearly explained in HMRC guide and I have already provided you with the link... here it is again for convenience at section - The 10-year anniversary charge. Inheritance Tax is charged at each 10-year anniversary of the trust. It’s charged on the net value of any relevant property in the trust on the day before that anniversary. Net value is the value after deducting anydebts and reliefs. The calculation is completed and explained in notes/guide accompanying Form IHT100. Your question is about the 6% chargeThis is applicable when assets are transferred out of a trust. It is not charged on income received on these assets or assets held.I hope this is helpful.