Antiavoidance code

Antiavoidance code

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An owner-director of a company voluntarily goes overdrawn on his DLA in a year, despite that there are adequate reserves to pay dividends (no service contract, directors fees at SET).

The motivation appears to be to restrict household taxable income to such an amount as to maximise the "maintenance grant" component of offspring's student finance package (at the expense of the "loan" component).

DLA is restored in the subsequent year.

If there is no anti-avoidance regulation to cover this, then I feel there ought to be.  But perhaps there already is.  Any takers?  I would expect there to be some "notional income" component as we have with Tax Credits.

With kind regards

Clint Westwood

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By Roland195
06th Jun 2013 09:55

Is it worth it?

Presuming that he had to declare twice as much in dividends this year to correct the loan position this would no doubt lead to much of this being taxed at higher rates. If this is so, was there a net benefit to his gaming of the system? (I appreciate that this does not answer your question though. I am unaware of any specific provisions however I do understand similiar issues arise with child maintenance payments).

 

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By nogammonsinanundoubledgame
06th Jun 2013 11:42

Thanks

Yes worth it (assuming not caught by something)

They draw on the company to fund private living expenditure at roughly a constant rate.  (actually H+W, so mentally double everything up).  If they personalise income at an equal level each year (to match drawings) their combined income each year is just about at the point at which any grant element would be converted into loan element each year.

If instead in alternate years dividends are taken to push both spouses up to the BR band limit, which is way over the top of the limit at which all grant is converted to loan, and in the intervening years take correspondingly reduced dividends, then in those intervening years they (or rather offspring) qualify for a grant element.  Once every other year is better than nothing.

With kind regards

Clint Westwood

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