should spouse be given shares?

should spouse be given shares?

Didn't find your answer?

In view of the current debate on whether dividends can be taxed as salary would it be unwise for the client to give his new wife say 20% of the shares in his trading company - she is company secretary and paid as an employee for her bookkeeping and administrative duties?
nick farrow

Replies (4)

Please login or register to join the discussion.

avatar
By User deleted
07th Nov 2006 21:14

NO
It would be quite sensible.

If I remember rightly, the last round of Arctic went against HMRC.

Simply explain the situation with the client - highlighting the risk - and let them make the decision.

But if it goes ahead, I believe your client would be better protected if his wife is also a director, which was one of the points in Arctic.

Thanks (0)
avatar
By nick farrow
08th Nov 2006 18:42

thanks Richard
I assume I will need to fill in Form 42

Thanks (0)
avatar
By User deleted
08th Nov 2006 19:20

Two issues
There's (at least!) two issues here. One is Arctic Systems, the other is whether the dividends could be deemed to be excessive and thus give rise to an employment income tax charge (effectively by saying that she did not pay market value for the shares on acquisition, and they are employment related secutiries and thus the excess should be taxable as employment income)..

Re: Arctic Systems. As already pointed out, HMRC lost. Also there are other issues to consider, did she provide any of the start-up capital, how involved is she in the running of the business, etc.

Re: the dividends, if she receives a market value salary for the work she does, I think HMRC will be unlikely to try to look to impose an employment related securities charge.

Is form 42 reporting required? Presumably they are founder shares, or the domestic exemption applies? I wouldn't have thought reportable.

Thanks (0)
avatar
By nick farrow
09th Nov 2006 11:15

thanks Meteen
she is paid market value for the work she does

Thanks (0)