I have a new client who requires a limited company. Husband and wife ( both will be directors) but wife earns a decent wage from another employment and she will therefore only have approximately £10000 spare before going into higher rates. This fluctuates year by year so I am considering issuing A and B shares to differentiate between husband and wife. Both will have voting rights.
I have never used these type of shares before and would you issue say 100 of each?
If yes.... is it ok for husband to have say £30000 dividends pa on A shares and wife £10000 on B shares?
Any info and advice gratefully received.
Thank you!
Replies (5)
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You should be OK.
The Patmore case was very unusual and, when you read the detail, there's nothing there to say you'll get adverse tax consequences from doing what you suggest.
But make sure the dividends for each share class go into a bank account in the name of the shareholder - not the spouse!
I agree ...
.... that the settlements legislation had a new twist brought by Patmore. So nothing is certain, but I'd be very surprised if HMRC took the constructive trust point on a vanilla case such as this.
The point about bank accounts was not meant to be about whether S660 (actually now S619 ITTOIA) bites. The structure is that:-
1: If there is a settlement tax is chargeable on the settlor (S619) BUT
2: There is an exception for an outright gift between spouses (S626) BUT
3: That exception is denied where "the property or any related property ... is payable to the giver" (S626 (4))
Lots of people go to great lengths to get the second step right (so they aren't caught at that stage) then blow it by having the dividend paid into the wrong bank account. HMRC accepted in a recent case I had with them (in relation to this specific aspect) that it doesn't matter what happens afterwards so long as the dividend goes into the right bank account to start with.
What are the capital rights of the A shares and B shares? How much will Mr and Mrs own?
If right are equal - A shares get half of the capital, B half of the capital too, ditto votes, then the other thing to be wary of is available reserves too.