Private school fees

tax allowances/gifting shares

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A client has been speaking to his friend on the weekend (rolls eyes)

The client has 50 shares in a profitable trading company his mother has the other 50.

The friend has suggested that he and his mother gift say 5 shares each to his daughter who is 9 years old. He suggested then decaring a dividend on which his daughters share will be covered by her annual allowance. Hence he gets the money out of the co tax free to pay the fees.

I am aware that if he gifts shares this wont work - anti avoidance - the dividend income will count as his.

However if just granny moves over some shares to the daughter is this ok? or is it a no no because he is involved in the company?

Thanks for any replies in advance 

Jon

Replies (16)

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By Justin Bryant
24th Aug 2021 15:09

As far as I'm aware, the grandparent gift to grandchildren trick still works re settlements legislation. Happy to be proved wrong. Usually done as an IIP. See:
https://www.accountingweb.co.uk/any-answers/school-fee-planning
https://www.accountingweb.co.uk/tax/personal-tax/use-shares-to-support-a...
https://www.accountingweb.co.uk/any-answers/children-as-shareholders-div...

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Replying to Justin Bryant:
Psycho
By Wilson Philips
24th Aug 2021 14:54

Justin Bryant wrote:
Happy to be proved wrong.

Since when? ;¬)

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Replying to Wilson Philips:
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By Justin Bryant
25th Aug 2021 13:01
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By David Ex
24th Aug 2021 14:48

Guessing there might need to be some kind of trust arrangements put in place. I don’t know what the average 9/10/11 etc year old girl would like to spend thousands of pounds on but I’m guessing school fees wouldn’t be top of the list.

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By paul.benny
24th Aug 2021 15:01

Don't forget that child will, in due course, have a mind of her own. And will have her own views as a shareholder, particularly if there is significant value in the company.

Remember too, that IHT could arise on gift from grandmother. Even though risk may be small, it would be prudent to mention it to client.

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By jonibarnes
24th Aug 2021 15:41

Thanks for the replies, all of which confirm that this is not as straight forward as the "friend" has made out. IE gift the shares, declare the dividend and happy days.

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By ireallyshouldknowthisbut
24th Aug 2021 16:04

Most of the planning around this will to do with the safeguarding at 18 when the minor is legally entitled to the income and it put it up her nose or of whatever she likes with it.

its hard to know what your 9 year old will turn out like, especially date I say the sorts of 9 year olds for whom a 5% share in the family business pays her school fees.

Which then tends to lead into trusts - which then leads into complexities.

There is also the issue of, well what happens if she marries at 18 and divorces at 20, so some considerable thought may be required to change the Articles to prevent a whole host of unlikely but possible events.

So whilst it may well be good planning, there is considerable risk to be considered.

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Replying to ireallyshouldknowthisbut:
paddle steamer
By DJKL
24th Aug 2021 16:13

Cannot agree enough, even grown up children can be idiots as over the years I have observed plenty of times with former clients.

When I was getting our wills drafted in the late 1990s the idea of my own children inheriting significant sums even with our estates going into trust until they were 25 gave me a fair few sleepless nights, even now when they are 29 and 27 I still have the odd niggling reservation as to what they might do if my wife and I both collided with a large bus or similar and they are both smart well educated individuals.

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Replying to DJKL:
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By gillybean04
24th Aug 2021 22:43

Ask them. Their answer might put your mind at rest. Or not!

My parents asked us what we would do if we won an amount of money. As a way to see what we would do with inheritance.

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Replying to gillybean04:
paddle steamer
By DJKL
25th Aug 2021 13:10

Maybe, that is a decent idea.

One is certainly a good saver and is now married, then again he earns a lot so can afford to save.

The other one not sure, but her long term boyfriend is certainly frugal and saved a deposit to buy a flat, so there is hope.

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By jonibarnes
24th Aug 2021 16:26

I couldn't agree more, I wouldn't do it myself (the thought of my now 8 year old having a stake in my hard earned business for nothing in just 10 years send shudders down my spine) - if he really wants to go down this route the trust seems the most sensible option.

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By JCresswellTax
31st May 2022 14:18

'On' the weekend? Surely it is 'At' the weekend?

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Replying to JCresswellTax:
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By The Dullard
31st May 2022 15:07

Both "on" and "at" refer to a point in time, whereas a weekend is a period of time, and so it is "over" the weekend.

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Replying to The Dullard:
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By Justin Bryant
31st May 2022 15:17

Private school fees presumably well spent in your case.

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Replying to Justin Bryant:
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By Hugo Fair
31st May 2022 15:57

Apparently not, since "on" and "at" refer to a point in space (i.e. a location) not in time ... as does "over"!

So, since a weekend is indeed a period of time, I would have preferred "during" the weekend - or possibly "over the course of". :=)

Of course Einstein's space-time continuum may require a different interpretation

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