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Tax planning - Limited Companies and children

Tax planning - Limited Companies and children

A recently signed client wants some help with regarding setting things up in his new limited company (set up 3 months ago) in the best way so that long term his young children (both uner 10) might benefit and he wouldn't have CGT many years down the line if the company was successful and he wanted to pass things on to his children.

Could his children be made shareholders from now so if the company grew they would benefit from owning those shares? Would a different class of shares help or would that confuse things longer term? Dividends I assume would be taxed on the parent until the children are 18?

Can the Company make pension contributions for the children at such an early stage?

Are there any good articles anyone might be aware of covering this type of planning?

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By DJKL
07th Nov 2016 15:02

The main considerations here are possibly not tax, your client might consider children going of the rails, poor marriage choices, their future insolvency etc. (unknown unknowns)

Letting tax overtake common sense is often a bad idea.

If I were your client I would be talking to a solicitor first and an accountant second.

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By Tornado
07th Nov 2016 18:26

I have two rental companies at the moment each set up with parents 1 share each and child with 98. This is very long term planning (17 years in one case) but at 7 years in, it is all working fairly well so far. In fact some speculative land investment may pay off extremely well.

As DJKL says, each situation will be different and good advice is required before starting, for example - ensuring that the share capital from each child is paid from resources not supplied by the parents.

Even now, one parent is worrying about what one child will do when he gets to 18 and I have to tell him that his child can effectively do what the hell he likes.

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avatar
08th Nov 2016 12:40

A shareholder agreement may help too

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By DJKL
08th Nov 2016 12:56

I suspect if I wanted to do something with minor children I would consider using trusts. Whilst tax considerations may not favour their use protecting individuals from poor life choices is possibly more important.

Certainly our wills, in the event of joint death, place our estates in trust with offspring only getting unfettered access at 25.

Given one is now 25 and the other is 22, and given they have both grown into mature, sensible individuals, albeit with a strange affliction that prevents them loading the dishwasher, this may with hindsight not have been necessary, however we sorted wills when they were small and until through the teens I am not sure any parent can be 100% confident re their child's future maturity as an adult.

Giving the wrong people unfettered access to money/assets may not do them any favours, parents need to protect their children; from some of the families I have observed as clients over the years a fair few really do need such protection.

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to DJKL
08th Nov 2016 13:48

DJKL wrote:
>

albeit with a strange affliction that prevents them loading the dishwasher

Have you tried administering vodka?

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By DJKL
to Portia Nina Levin
08th Nov 2016 14:17

With vodka I suspect timing is everything (before or after)

However I doubt it will work, both stay fairly lubricated and the only discernible consequence is they get up later on those days they are not working.

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