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Can I transfer shares to my wife to reduce tax?

My wife is employed, paying tax by PAYE. Can I give her some shares to keep my tax in lower bracket?

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Background
I'm a joint business owner and director. I'll hit the higher band of tax with basic salary (£10,600) and dividends (£50k). My business partner will take exactly the same as me (50:50) via B-shares (we both have 1-B share each), I own 75% (3 A-Shares) of the business, he has 25% (1 A-share).  My wife's salary is ~£32k through a full time employed job, taxed via PAYE.

Question
As example, can I give my wife 1/5 of my B-shares so I'd take £40k in dividend and she'd get £10k as an additional income, keeping us both in or around the basic tax threshold for 2021/22? 

If yes, would she then need to do a personal tax return just for that dividend, as otherwise her tax is all done for her?

If yes, would I change the B-Shares on companies house to something more sensible like 10,000 total, 4,000 for me, 1,000 for my wife and 5,000 for my business partner?

Replies (21)

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By Wanderer
17th Jan 2022 17:18

So your company hits £120k+ of income for you & your business partner?

What does your accountant say about your scheme?

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Replying to Wanderer:
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By tbz
17th Jan 2022 17:39

She's on annual leave for 3 weeks (not bad eh?) so I'm asking here in the meantime, but partly because I was 'sheepish' on asking her anyway - if it's not above board I will taint the relationship asking, but from nearly 2 hours of Googling and reading up, I cannot find an answer.

We have nearly £200k in clear profit built up over 8-9 years hard work. Previously we've kept profit to use to employ a few more but now in a position to draw a bit more as reward. I'm aware a good 'scheme' (as you call it) is to put that money into pension but this year, i'd prefer so extra money for a house renovation.

My wife voluntarily does a fair few hours of admin on weekends, so I don't feel particularly bad giving her shares - she also does all the things I don't have time for with working long hours building this business, so she entirely deserves an annual pay out. That said, I'm not looking to justify things, if it's not above board, I'd scrap it - I will always follow the law.

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Replying to tbz:
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By Bobbo
17th Jan 2022 18:10

An accountant taking 3 weeks' leave in January? Sounds like the dream!

You will not taint your relationship with your accountant if you approach them along the lines of "i've heard about doing this to save some tax, is it legitimate and would it work in my scenario?" Your accountant will probably appreciate being kept in the loop re your ideas and plans.

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Replying to tbz:
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By Mr_awol
17th Jan 2022 18:48

Personally I’d wait three weeks and get proper advice from my trusted advisor who knows my individual circumstances and can advise me on the pros, cons, and potential pitfalls of such an idea.

But if you want to pin your hopes on strangers on the internet (who may or may not know what they’re on about) to save a few quid then sure, go for it, transfer the shares (or issue new ones) to get the split you desire. What’s the worst that can happen?

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By David Ex
17th Jan 2022 17:26

If you’re considering any transaction like this, you need to take paid for advice from someone who knows your financial affairs - and who you can sue if they give you an incorrect steer.

EDIT: You said in 2014 that you had an accountant so they should have a complete picture of your finances.

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Replying to David Ex:
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By tbz
17th Jan 2022 17:43

Hopefully my answer to 'Wanderer' above answers you. I'm not looking to avoid asking my accountant for paid advice. She's lovely but she's away and as explained, if this is 'off' and a no-no, I don't really want to ask her.

I'm not looking to take anyone's answer as Gospel - just trying to find the answer to if it's a tenable option to consider. I'm certainly not looking to sue anyone, or even make someone feel uncomfortable in answering.

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Replying to tbz:
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By Hugo Fair
17th Jan 2022 19:28

It's 'tenable' (in that nothing you've described is in itself illegal) ... but, as has been said already, you need to have someone who knows what they're doing to sort all the correct paperwork/filings/payments (in the right order).

And that is only IF, after taking professional advice, you still want to proceed.
For instance are you comfortable that your business partner may then be able to out-vote you (depending on share class rights)? How do you get 'your' shares back if there is a schism in matrimonial heaven? And so on.

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Replying to Hugo Fair:
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By tbz
18th Jan 2022 10:18

Thank you, I will ask her the question on her return, now I feel more reassured it's not a totally unthinkable suggestion.

In terms of share rights, we have A-shares (3 to 1) for voting and B-shares (1 each) for pay-outs, so I would still have 75% (majority) share.

Regarding unthinkable matrimonial kerfuffles, I'd probably have much bigger problems than my (ex)-wife taking 10% of any dividend pay-outs! Bye-bye house, son, friends and happiness as I know it...

But as I've posted below, this would all get batted back and forth with my accountant before a decision is made. This post was simply to ask if it's possible.

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Replying to tbz:
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By Leywood
17th Jan 2022 19:45

‘ if this is 'off' and a no-no, I don't really want to ask her’

What an utterly ridiculous thing to say.

If one of your schemes is ‘off’ she will happily tell you to stock being a plonker.

She will think worse of you for not asking her. It’s not urgent, wait until she gets back from her January holidays.

I do hope she is on aweb.

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Replying to Leywood:
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By Paul Crowley
17th Jan 2022 20:18

Agree
My nose would be seriously out of joint if one of my clients decided to ask on a website about tax planning
I would read that as client not trusting my judgement

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By Matrix
17th Jan 2022 19:20

Why aren’t you paying your wife for the admin she does voluntarily?

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By Tax Dragon
17th Jan 2022 21:41

IMHO folk that try to answer this type of question start from completely the wrong angle - trying to take the place of an advisor. How many times?! This is no more a place to be looking to give advice than it is a place to come to take advice. And the OP here is not looking for advice (whether the scheme is a good idea); just a comment on whether wife would be taxed on the dividends.

On that front, because the B-shares are non-voting (and we don't know what rights they have vis-à-vis winding up etc), it's not possible to be definitive. All we can say is that it's more likely (compared with Arctic) that the dividends would be taxed on the husband under the settlements legislation, and that ERS legislation (that I don't think existed in its current form back then) would also need to be considered.

Now, was it so hard to say that? And have I felt it necessary to try to advise the OP? Or even to point out that he should take advice?

All that said, I think in future I'll even refrain from even the rudimentary type of analysis I have given here. What's the point?

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Replying to Tax Dragon:
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By paulwakefield1
18th Jan 2022 08:55

Tax Dragon wrote:

All that said, I think in future I'll even refrain from even the rudimentary type of analysis I have given here. What's the point?

Ah, I can answer that one!

It is for those of us who have comparatively narrow accountancy knowledge and, in my case, especially not tax. Nevertheless I like to keep in touch, broaden my knowledge and at least be aware where my clients may have an issue so that they can take advice.

This forum has been an invaluable resource over the years for just that. Even snippets like TD's analysis above are great and may even lodge in my brain long enough to be useful.

It is why I find "get an accountant" responses rather disappointing. The advice is of course quite correct in most instances but it would be really useful if the answers were then expanded to "because the issues you face include x, y and z".

So TD please keep up with your analyses. Even if the OPs do not appreciate it, I and I am sure others are lurking and absorbing your wisdom.

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Replying to paulwakefield1:
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By tbz
18th Jan 2022 10:08

Thanks to both Tax Dragon and Paul W for your comments.

I instantly regretted posting the question as more passive aggressive or contemptuous responses kept coming in, mostly not answering the questions but striving to pick holes, make me feel ridiculous or guilty for asking the accounting question in an accounting forum - a toxic and unproductive marsh I could easily get bogged down in, and for what point?

I have an accountant that I spend a few £k's per year with, and they are invaluable. They do the CT600, Payroll for 5 people, our VAT returns, dividend paperwork and occasionally give tidbits of advice. Additionally, I always ensure to thank them for their work. I don't post questions here to avoid paying for accountancy. I post because if I can't find an answer, maybe others will find that answer when they Google the same.

In simple terms, I was asking 'could I' not 'should I', all very theoretical that if viable, I may then discuss with my accountant, and she would then charge me for time to reallocate share apportion, any dividend certificates and probably end up doing my wife's personal tax return. She'd also charge to advise on the more specifics of its viable nature based on my and my wife's specific circumstances.

I requested this post was deleted by a moderator some time yesterday before TD's more positive, constructive response. I don't know if they'll remove it but maybe it should stay as a reminder as to what this forum is for and to perhaps be kinder to strangers.

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Replying to tbz:
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By Tax Dragon
18th Jan 2022 10:42

'Could I' is legal; 'should I' is what most contributors here think of as advisory. Although I am an advisor, I have no interest in discussions in this forum on 'should I' type questions. And my starting point is to take 'I could' as read (if there's any true doubt about legality/lawfulness [eg are there transfer restrictions in the Articles or a shareholder agreement etc?], you need legal advice).

My contribution - and this is what I think the forum is for, when tax questions arise - is to point to tax legislation that may or may not apply. Which I have done. (I make no claim that it is a complete list.)

PS - you could withdraw your request.

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Replying to Tax Dragon:
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By tbz
18th Jan 2022 11:06

Thanks for letting me know I 'could' withdraw the delete request, not that I 'should' (sorry, couldn't help myself - meant with good humour to all).

I have removed the 'report' request to delete the post but I hope Pandora's box doesn't open wider than it has.

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Replying to paulwakefield1:
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By Jason Croke
18th Jan 2022 10:46

paulwakefield1 wrote:

It is why I find "get an accountant" responses rather disappointing. The advice is of course quite correct in most instances but it would be really useful if the answers were then expanded to "because the issues you face include x, y and z".


The "get an Accountant" response is because the Any Answers forum is meant to be for Accountants who have questions. I agree that "get an Accountant" isn't particularly helpful and I always try to explain in my posts the issues before suggesting they get specialist advice, and like you I read all the threads, not just the VAT ones, because I pick up useful knowledge along the way.

On saying that, other posters may be frustrated that instead of helping fellow Accountants and book keepers (as is the intention of this forum), they are giving away free advice to OP's who more often than not are financially secure enough to actually pay for formal advice (ie, I've just sold a house for £5m and want to avoid paying tax) type questions.

It's a fine line between being helpful to an OP and being disrespectful to our trade and profession, so many people see Accountants as a pointless expense they can do without and yet suddenly value the experience and knowledge that we have when it is given away for free.

I think the balance is just about right here at Any Answers, but it's January and the month where the DIY'ers will be out in force, so we may well see some short tempers and nerves for a few weeks, lets keep it cool :)

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Replying to Jason Croke:
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By paulwakefield1
18th Jan 2022 11:09

I do take your point Jason (although it sometimes appears that the expectation is that the forum should be limited to those in practice rather than including those out in industry/business which can be a lonely place). I can also understand the frustrations.

I am not suggesting advice should be given - apart from anything else, by the nature of the beast, rarely is there enough information. But guidance as to the specific issues and considerations is useful to the likes of me as well as the OP. I often think "That's a useful reminder" or "That's an approach I had not thought of" and, more scarily on a basic issue and fortunately rare "I never knew that". Often these have come out on the back of straightforward, banal or just irritating OP questions. And some questions are actually rather good.

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Replying to Jason Croke:
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By tbz
18th Jan 2022 11:17

I can appreciate and sympathise with those circumstances. No one likes a Tony Blair, buying properties through offshore companies to avoid tax. I don't want to be 'that guy'. I live a modest existence and like everyone, I'm concerned about the rise in energy costs, cost of living and my children's future - if I can save a little here and there in a non controversial and legal manner, great. I don't want to upset anyone and apologise to anyone who feels as such.

I've visited all the pages in the 'ask a question' or forum area, and it's certainly not clear that this is for accountants only. I think acc-web need to signpost this better so more of the general public don't get stuck in the marsh of contempt in error.

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Replying to tbz:
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By Jason Croke
18th Jan 2022 11:51

It's at the stage when you register for an account, but as you've been a member for some years then you may not actually remember that far back, which is fair enough!

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Replying to tbz:
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By Jason Croke
18th Jan 2022 11:53

Duplicate post!

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