Splitting income non married couple

Splitting income non married couple

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Arctic Systems seemed to give the thumbs up for splitting of dividends between husband and wife in a small limited company.

My client is not married to his long term live in partner but is setting up a limited company and wants to split the shares 50/50 with his partner; she will do some "admin type" work.

Is this likely to be acceptable to HMRC or does the fact they are not married put a spanner in the works of this type of arrangement (because there is no spousal exception).

Is there a way to make income splitting allowable between unmarried partners; logically it should be more allowable because the 2 people are not bound together legally as one unit and should be viewed completely separately.

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By User deleted
18th Nov 2014 07:53

Two enterprising adults Mr and Ms agree to come together through a memorandum of association to form a private limited company to do business together. What settlement legislation has got to do with it? Nothing.

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Replying to Adam12345:
By JCresswellTax
18th Nov 2014 09:09

This is

taxguru wrote:

Two enterprising adults Mr and Ms agree to come together through a memorandum of association to form a private limited company to do business together. What settlement legislation has got to do with it? Nothing.

The exact view I use when considering this position.

It's never been challenged so i'm unsure as to how successful it would be.

However, I inform the client of the risks and let them proceed if they want to.

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By Exector
18th Nov 2014 11:15

Is there bounty? Can the "settlor"still benefit?

The basis position of course for anything to be within the settlements legislation is that there has to be bounty- so basically somebody getting more out proportionate to what is contributed than another party (so that one party is effectively giving up value to the other otherwise than for full return). Over and above that, the legislation requires the person giving up value to be able to potentially recover or otherwise  benefit from that surrendered or transferred value (ie it is not in reality  fully & completely relinquished). Whether or not the parties are married or in a civil partnership is primarily of relevance in identifying if the so-called "Spouse Exemption" from the settlements legislation can apply.  So unmarried/CP couples cannot have Spouse Exemption, but if  they live together and have a joint spending pattern, then by this there may be arrangements in place where the income will be paid or applied for the benefit of the "settlor"  and in that scenario, if there is bounty,(ie not a full value quid quo pro),  then there is a potential for HMRC challenge. HMRC TSEM4320 summarises their view. http://www.hmrc.gov.uk/manuals/tsemmanual/TSEM4320.htm

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Replying to paul.benny:
Red Leader
By Red Leader
18th Nov 2014 11:59

bounty

There is likely to be an element of bounty if the fee earner splits 50:50 with someone who is just doing a bit of light admin.

The threshold for the married couple is lower as they just have to show that the lesser party has received more than purely a right to income. Ordinary shares are considered to convey more than purely a right to income, so that achieves entitlement to the spouse exemption.

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