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
Replies (2)
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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).