Children as shareholders - dividends for school fees

Children as shareholders - dividends for school...

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Does anyone have children as shareholders, where they receive dividends and this pays private school fees.

I have one client who had tried to pay school fees through his company as tax deductible!!!!! Now trying to pass shares to his children to save him tax and pay their school fees.

I see this as tax avoidance...am I correct?

Replies (22)

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By Tim Vane
04th Dec 2015 13:17

Perfect plan, as long as the school fees are not more than £100 per year...

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By Justin Bryant
04th Dec 2015 13:18

Due to

Tax anti-avoidance legislation re transfers to minor children being taxed on parents, this only works for gifts of shares by grandparents and is normally done via an IIP trust. Search this site for more info., but this may be less attractive going forward due to imminent changes to dividend tax rules.

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Portia profile image
By Portia Nina Levin
04th Dec 2015 13:40

Pay them a tax-deductible salary and let them pay their own bloody school fees. Screw tax law!

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Replying to Paul Crowley:
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By qhas
06th Dec 2015 12:59

School fees

Portia Nina Levin wrote:
Pay them a tax-deductible salary and let them pay their own bloody school fees. Screw tax law!

Can that arrangement be attacked unless it can be demonstrated that they actually work for the company ?
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Replying to Wanderer:
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By Portia Nina Levin
06th Dec 2015 14:43

Seriously?

qhas wrote:
Portia Nina Levin wrote:
Pay them a tax-deductible salary and let them pay their own bloody school fees. Screw tax law!
Can that arrangement be attacked unless it can be demonstrated that they actually work for the company ?

Are you seriously suggesting that my little plan will not work? Send the little blighters up a chimney while they are small enough!

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Replying to AC71:
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By qhas
06th Dec 2015 22:33

Seriously

Portia Nina Levin wrote:

qhas wrote:
Portia Nina Levin wrote:
Pay them a tax-deductible salary and let them pay their own bloody school fees. Screw tax law!
Can that arrangement be attacked unless it can be demonstrated that they actually work for the company ?

Are you seriously suggesting that my little plan will not work? Send the little blighters up a chimney while they are small enough!


Now why didn't I think of that !
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By murphy1
04th Dec 2015 13:54

Aww...he's nuts! Doesn't listen to me re Transaction in securities and Settlements legislation...he know best! Thank god its Friday!

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By ireallyshouldknowthisbut
04th Dec 2015 14:43

.

Paying school fees via a limited company is not tax avoidance. It would be evasion if its just treated as a business expense, but if done properly it would also be a BIK, which would under almost any scenario be more tax to HMRC than taking dividends. 

Ie more cash for the treasury, not less!

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Nichola Ross Martin
By Nichola Ross Martin
04th Dec 2015 19:48

Hindsight is a wonderful thing but

really the answer is just to set every client up with a family company when they come to you and years later when they have grandchildren you will have the perfect structure in place.

No doubt I will get moaned at but I have some good guides on my site on this topic.

 

 

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By SE_Confused
07th Dec 2015 06:25

how about salary (if old enough) plus the 5k in dividends?

I presume the 5k under the new rules will not be assessed on the parent?

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By Marion Hayes
07th Dec 2015 06:58

@neutru

Why would you assume that?

Salary - watch out for local child employment regulations.

Dividends - it is income, and over £100, so it is the parents income. Then you would look at how it was taxable.

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By SE_Confused
07th Dec 2015 07:19

nevermind, thought for a moment the new 5k dividend allowance would benefit

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By Justin Bryant
07th Dec 2015 10:56

If

They have no chimney etc., then there is no age or quantity limit for company secretaries, so you could perhaps consider that.

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Portia profile image
By Portia Nina Levin
07th Dec 2015 14:11

Has your client considered the possibility of purchasing the school? Then there would be no need for them to pay fees and they could be sent there for nothing without tax or NIC consequence.

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Replying to paul.benny:
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By qhas
07th Dec 2015 18:37

School purchase

Portia Nina Levin wrote:
Has your client considered the possibility of purchasing the school? Then there would be no need for them to pay fees and they could be sent there for nothing without tax or NIC consequence.

As p*** taking goes this takes the biscuit
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Nichola Ross Martin
By Nichola Ross Martin
07th Dec 2015 15:02

There would be a BIK, if you purchase the school

although no BIK if the director were to purchase as a sole trader, so perhaps incorporation relief is an added value service in this case.

Found this which gives some idea of salary levels for family members: http://www.dailymail.co.uk/news/article-2419462/Quarter-MPs-jobs-family-...

do remember Derek Conway (https://en.wikipedia.org/wiki/Derek_Conway ) his son turned out to be full time student. 

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By Tim Vane
07th Dec 2015 15:16

It is surely more efficient to purchase children who have already been educated, thus avoiding the cost of having to school them at the client's expense. I have a couple of children who have now completed the entire education process at great expense and are now, frankly, just cluttering up the place. For only a nominal fee I would be happy to let your client take them off my hands, and he can simply donate his own unfinished ones to a favourite charity. The government used to provide workhouses to take in the overflow, but unfortunately with the cuts to welfare spending over recent decades the options are now much more limited.

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Replying to Duggimon:
paddle steamer
By DJKL
07th Dec 2015 16:00

A Modest Proposal

Tim Vane wrote:

It is surely more efficient to purchase children who have already been educated, thus avoiding the cost of having to school them at the client's expense. 

Presumably influenced and in the spirit of Swift's " A Modest Proposal" 

Always knew studying literature at university would eventually have application to a career in accountancy but it has taken a fair number of years for the occasion to arise.

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Portia profile image
By Portia Nina Levin
07th Dec 2015 15:18

Masters of Malvern College Nichola?

Is one to understand Tim, that the children in question are too large to climb chimneys?

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By Tim Vane
07th Dec 2015 15:23

Too large for domestic chimneys certainly, but there should be no problem cleaning industrial chimneys or cooling towers. Just tie them to a bungee rope and push them off the top. Chim-chim-cheree.

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Nichola Ross Martin
By Nichola Ross Martin
08th Dec 2015 14:55

Masters of Malvern College

Portia still a BIK, and can be rather expensive if your children want any extras. 

Why not send the children off for apprenticeships instead? If you have an apprentice and you are a single director employee I am thinking that you may still get the ERs allowance for yourself. 

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By tonycourt
08th Dec 2015 17:17

What's with all the chat about b***** chimneys?

Surely this is the time of year for portly red-robed benefactors to descend chimneys, not for stuffing expensive posh kids up them!  

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