Arctic Systems?

Arctic Systems?

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The husband works in a company and owns 20% of the shares. He receives salary and dividends each year and pays 40%. He wants to give his wife half ie 10% so that dividends are paid to her also.

Whilst the company has an asset base i feel that this could be open to attack in future iof IR come back and succeed as basically he wants to just save tax.

Anyone any thoughts

Many Thanks
david charlton

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By User deleted
20th Sep 2006 11:54

Depends on the asset base (HMRC's view) - it needs
to be sufficient for the shares to be a right to capital as well as income.
The courts may feel otherwise "a share represents a bundle of rights" - Court of Appeal Artic case.
So no problems on the face of it with a gift between spouses providing it is an outright gift and the husband does not benefit in any way whatsoever from the income or capital that this represents.
This is neigh on impossible if the couple live together as she could use the income from a dividend to buy him lunch/buy him a pressie/spend it on their joint property.

However, that is my view on this, so far HMRC has not tested this aspect, I am sure they would like to! It appears that Parliament really wanted spouses to be able to share assets when they brought in a settlement exemption for spouses in in the last century.

Therefore on the face of it, providing the dividends go into her bank account, and she has control over the money, the gift of shares will be without any form of reservation and the resultant income not for the husband's benefit.

S.626 ITTOIA 2005 is your section. My fears are probably greatly exaggerated! I wrote an article about this which is in the settlements section of my website: www.rossmartin.co.uk.
I will pop it up on Aweb as a tax feature in the next few days for you.

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