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Setting up company

Dividend income only

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Client is director and 25% shareholder of Company A. His wife not involved with company.  Wants to set up new company B and transfer his shares from company A to B.  Company B will not be trading and only source of income for Company B will be dividends from Company A. He and wife will be directors of Company B and own 50% shares each. Wants to pay wife salary from company B and pay themselves divs to use up basic rate tax band. Is this possible? if Company B has no trading profit then can they pay themselves dividends?  

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By DJKL
25th Jun 2019 15:51

Why, as asked by Annie Lennox?

"Turning inside out turning inside out
Tell me...
Why
Tell me...
Why"

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25th Jun 2019 17:05

The profit does not have to be trading profit to be able to be distributed. What do you think investment companies do?

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25th Jun 2019 16:39

Your client needs to speak to a qualified accountant.

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By pauld
25th Jun 2019 20:59

Accountant A - what qualification should the accountant hold? And do they need to be a qualified tax adviser? Or should the accountant know everything about tax as they are 'qualified'?

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to pauld
25th Jun 2019 22:23

pauld wrote:

Accountant A - what qualification should the accountant hold? And do they need to be a qualified tax adviser? Or should the accountant know everything about tax as they are 'qualified'?

One that enables them to advise clients competently. I refer you to johngroganjga's response.

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By Matrix
25th Jun 2019 21:18

Why do they want to pay her a salary?

Dividends are paid out of post tax profits so the only income B received has already been taxed.

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By pauld
26th Jun 2019 08:02

Accountant A - thank you for your wise words and advice. I have not dealt with investment companies before and so thought I would just post a question on this forum to seek a few opinions. Most people are generally quite helpful. I take from your advice that I am just an incompetent qualified accountant, but perhaps I shouldn't judge a book by its cover !

Matrix - wife has no earnings so client wanted to find a way of making use of her PA and also get NI credits.

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to pauld
26th Jun 2019 11:16

pauld wrote:

Matrix - wife has no earnings so client wanted to find a way of making use of her PA and also get NI credits.

Would dividends not use her personal allowance? Are there any kids in the household?

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26th Jun 2019 09:57

Surely you have transactions in securities problems here?

The transaction is totally tax motivated.

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to JCresswellTax
26th Jun 2019 11:18

?

Can't see a counteraction notice on this, if I'm being honest.

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