Hi All
My Friend has a ltd company(Close Company) providing Business Management services as contractor, has turnover 150K-200K, One accountant adivise him that he can issues 33% shares to his mother who is in india and can vote her dividend this way he can save tax, remaining 66% will be him and his wife,
Is this right? will HMRC not come back? as mother has no involvement in company, just issueing her shares to avoid paying tax and withdraw dividend,only my friend is earning for company,
Do mother has to file tax return in UK? as she donot have NI number and never have income in UK.
Thanks in Advance,
Regards
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Replies (3)
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Questions
1. Has Indian tax been considered?
2. Is it intended that the mother "give" the cash to him? If so I believe the settlor interested settlement rules would apply taxing the income on him.
Hi Thanks For Reply,
Yes mother will file tax return in india,
As this is new company so mother is not investing only getting shares on £1 each value,
Regards
anybody can own anything
Sure, anyone can own shares in a company for which they don't work. That's what makes the FTSE, lots of people owning shares in companies. And it's why all those attempts by HMRC to tax the "working" spouse on the income attributable to the shareholding non-working spouse have failed to date.
If it's newly formed, it's not an issue, though the mother should actually pony up the £1/share value. If it's a pre-existing company, the shares have value which is probably in excess of the £1 and therefore results in various issues relating to gift, capital gains, and so forth.
As the other poster notes, the mother can't then turn around and give him the money, or the HMRC would deem the shares to be actually owned by him. In that scenario, she's a custodial shareholder and he is the nominee beneficial shareholder. Custodial shareholding is common in countries where nonresidents can't own shares and it is also a common form of asset protection from lawsuits and divorces.