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Can a grandparent issue shares to grandchildren?

Can a grandparent issue shares to his grandchildren who are minors

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I have a client who has large reserves within his company and has asked if he can set up alphabet shares and issue them to his grandchildren who are all toddlers and then pay them dividends each year.  I understand alphabet shares but don't know if this will create a tax liability for him personally under the settlement provisions. 

Any advice would be apprecited. 

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Lone Wolf
By Lone_Wolf
16th Nov 2018 15:12

I believe they can. I recall seeing some tax planning involving grandparents and alphabet shares, and the dividends being used to pay school fees.

From what I recall the settlements legislation was avoided as they were not their minor children. If the parents had set it up then they'd have been caught.

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By Montrose
16th Nov 2018 15:28

Watch out for an IHT elephant trap-IHTA s98- any consequential transfer of value is specifically not a PET [s98(3)].
There is an open question whether the section applies to Alphabet shares at issue, or when value passes out of the Grandfather's shares because of the subsequent dividend declarations.

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By Montrose
16th Nov 2018 15:28

Watch out for an IHT elephant trap-IHTA s98- any consequential transfer of value is specifically not a PET [s98(3)].
There is an open question whether the section applies to Alphabet shares at issue, or when value passes out of the Grandfather's shares because of the subsequent dividend declarations.

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By Adam12345
16th Nov 2018 16:44

CGT also needs to be considered. Without all the facts, I would probably say this is caught by the Value Shifting rules in s29 TCGA 1992.

Albeit gift relief and entrepreneurs relief may be available.

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