Do I have to pay tax on dividends?

TheCyclingProgrammer

polymaff wrote: »

Oh dear - but that is my very point.

Enough.

So given that on the information given its very likely that OP would be fine unless they start doing silly things already discussed, you admit that you're simply scaremongering with your silly nonsense about his spouse needing to have an active role in the company and you're unwilling to back up your claims? Right.

polymaff

TheCyclingProgrammer wrote: »

I'm not trolling here ...

TheCyclingProgrammer wrote: »

So given that on the information given its very likely that OP would be fine unless they start doing silly things already discussed, you admit that you're simply scaremongering with your silly nonsense about his spouse needing to have an active role in the company and you're unwilling to back up your claims? Right.

I suggest that you reflect on how you have switched from your usual, polite, style into Troll mode (instant reply, multiple insults, belittling aggression).

Definitely enough.

TheCyclingProgrammer

polymaff wrote: »

I suggest that you reflect on how you have switched from your usual, polite, style into Troll mode (instant reply, multiple insults, belittling aggression).

Still no citation? OK then. That's a shame. I was genuinely interested to read about these other cases.

I have not used a single personal insult. I have attacked your claims as scaremongering and yes, I described them as "silly nonsense". If you think they are insults...*shrug*

chrismac1

Yes, put up or shut up time polymaff your bluff has been called and your flush is busted here otherwise.

booksurr

chrismac1 wrote: »

Yes, put up or shut up time polymaff your bluff has been called and your flush is busted here otherwise.

perhaps you should contact the ICAEW for the details since it is they who made the statement?

section "The Case" para 3
http://www.icaew.com/en/library/subject-gateways/tax/tax-cases-and-legislation/settlements

the details are then available in the catalog (members only) at the bottom of the page

Okrib

Interesting responses.

My wife and I own shares in a privately held company. We own approximately 30% of the company but have nothing to do with the day to day running of it. The shares came to me via my family approximately 10 years ago.

Given the recent changes to taxation of dividends and fluctuating dividend payments, we have transferred shares between us (and will continue to do so) to make sure we use up our £5,000 tax free allowance each. My wife then holds the remaining shares as she is not currently working so she gets to use her personal allowance which otherwise she wouldn't.

Is there anything we should be concerned about?! I thought we are just doing sensible tax planning.

uknick

Okrib

The issue with the OP's musings was that they were close to being tax "evasion".

His idea was to maximise his tax free dividend allowance and let his wife have the remainder taxed at her lower rate of income tax.

His wife would then give all the cash back to him.

The end result being he received all the dividend income but taxed at a much lower rate than his marginal rate.

What you are doing is sensible tax planning.

martinsurrey

booksurr wrote: »

perhaps you should contact the ICAEW for the details since it is they who made the statement?

section "The Case" para 3
http://www.icaew.com/en/library/subject-gateways/tax/tax-cases-and-legislation/settlements

the details are then available in the catalog (members only) at the bottom of the page

I am a member, and there are no more details other than the arctic case.

"HMRC subsequently won other cases involving husband and wife businesses with income splitting arrangements where the situations were not identical to the Arctic systems case."

Income splitting covers everything from share gifts, to dividend waivers to inflated salaries, to interest on loans, the ICAEW quote is so vague that using that to justify this comment:

"Unless the wife has, and has had, a demonstrable and proportional role in the business it sounds like a solid candidate for a settlements claim by HMRC."

is at best misinformed, and at worst scaremongering.

the wife needs zero to do with the business, as long as the shares were a gift.

TheCyclingProgrammer

Okrib wrote: »

Given the recent changes to taxation of dividends and fluctuating dividend payments, we have transferred shares between us (and will continue to do so) to make sure we use up our £5,000 tax free allowance each. My wife then holds the remaining shares as she is not currently working so she gets to use her personal allowance which otherwise she wouldn't.

Is there anything we should be concerned about?! I thought we are just doing sensible tax planning.

On purely a technical point: it is possible that your transfer of shares would constitute a "settlement" because she there is an element of bounty in the gift - she's receiving something for nothing. This means that HMRC could potentially challenge what you're doing under settlements legislation. It doesn't mean they will, or that they would win, but the possibility is there.

What class of shares do you own? Are they ordinary shares? Do they entitle you only to dividends or do they give you voting rights or a right to a share of any capital on winding up? If so, then its likely the spouse exemption under s624 applies and you've got nothing to worry about.

If they are a class of shares that only entitle you to dividends, then they would be seen as a gift of income and therefore the spouse exemption would not apply and HMRC could possibly seek to tax the dividends as if they were your own.

This is of course all hypothetical - HMRC would have to raise an enquiry in the first place - but you did ask.

Okrib

TheCyclingProgrammer wrote: »

On purely a technical point: it is possible that your transfer of shares would constitute a "settlement" because she there is an element of bounty in the gift - she's receiving something for nothing. This means that HMRC could potentially challenge what you're doing under settlements legislation. It doesn't mean they will, or that they would win, but the possibility is there.

What class of shares do you own? Are they ordinary shares? Do they entitle you only to dividends or do they give you voting rights or a right to a share of any capital on winding up? If so, then its likely the spouse exemption under s624 applies and you've got nothing to worry about.

If they are a class of shares that only entitle you to dividends, then they would be seen as a gift of income and therefore the spouse exemption would not apply and HMRC could possibly seek to tax the dividends as if they were your own.

This is of course all hypothetical - HMRC would have to raise an enquiry in the first place - but you did ask.

Thanks for the reply. The shares are ordinary shares, and carry voting rights as well as a dividend payment and the right to payout should the company be wound up. The transfers are done once the dividend payout is known and registered with the company secretary along with the relevant forms etc.