 |
 |
|
|
|
|
|
|
|
| One Man Limted Company - beware Section 660A (09/05/03) |
|
| It is common for one man limited companies to save tax by issuing shares to their spouse and paying dividends. |
|
 |
The idea behind this is firstly to save National Insurance by paying dividends. Secondly, tax may be saved by notionaly paying tax at 10% and by keeping all or some of the husband's income out of the higher tax bracket.
Controversially, the Revenue deem that the holding of shares by a non-working, non executive spouse to have been a gift from the working executive spouse. Under S660A (ICTA 1988) income arising under such gifting, known as a settlement, is treated as the income of the settlor, the spouse who made the 'gift'. The tax planning that has been in operation for years is immediately undone. 'For years' is the opperative word here. The Revenue may go back six years and correct the lost tax.
Recently the Revenue have been claiming up to £42,000 per case.
It appears that one man limited companies are not the only target. The new focus is on small management companies.
If you are worried by this development contact your tax advisor. |
|
|
|
|
|
 |
|
|
|
|
| |
|
