Arctic Systems / Dividend Payments

[DuaneJackson]

In light of the Arctic Systems vs HMRC decision inbthe appeal court; Should small one man companies consider transferring a 50% share to their spouse to save tax paid on dividends?

 

[multilingual]

This is something I was following as well.

We are a Husband and Wife LTD company, but we both play a full-time active roll in the business, so we would have had no real issues with this verdict. It would only really effect those whose partners were not involved in the business and were just taking out dividends tax free.

On the face of it, I would say Yes to your answer, but I would suggest that a role is created within your company for your partner to take up, even if it just a non-active one.

I would imagine that this issue will return in the future so better to be prepared.

Just my thoughts.



JB

 

[DuaneJackson]

Thanks - waiting to see if HMRC go to the House of Lords before I even consider doing anything - and even then I'll do whatever my accountant suggests.

I'd be interested to hear others opinions on this.

 

[Alpha]

Under the legislation as it stands then it would be best to either form the company with the spouse being a shareholder or to gift the shares to the spouse (There may then be a Capital gains issue).

There may of course be a different set of advise should the HMRC appeal be granted and upheld

please note this is the distilled and to the point answer.

 

[gj]

We normally recommend that some shares be issued in the spouse's name from the outset, or as sson as possible. If these are different classes there is greater scope for tax planning.

The Arctic case has perhaps highlighted the fact that those who do not have their company arranged like this should at least consider it.

With the tax year end fast approaching, if you are likely to have sufficient income to be taxed at 40% in the current or future tax year's then it is worth looking at transferring shares and paying dividends to your spouse pre tax year end, subject to available profits.

The whole Arctic case has IMHO been an attepmt by the Inland Revenue to shoehorn what they want to achieve into the wrong legislation, interpreting it to suit their requirements in this regard. Pending the outcome of the case, it must make sense to at least do what one can in this regard - if it is not done and then the Revenue do not win at appeal, you will kick yourself for not having done something!

If you want a chat about this, email or PM me

Regards


Graham