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NI savings
In order to save National Insurance, my client is planning to issue 100 shares to four of its employees, none of whom is connected to the controlling shareholder. The shares will be redeemable at the will of the company. The shares are non-equity and the client would prefer that they are non-voting, but this is not essential.
NI savings
In order to save National Insurance, my client is planning to issue 100 shares to four of its employees, none of whom is connected to the controlling shareholder. The shares will be redeemable at the will of the company. The shares are non-equity and the client would prefer that they are non-voting, but this is not essential.
After we have obtained confirmation from Shares Valuation Division that the shares are only worth a negligible amount, our client will use the shares to pay bonuses by way of dividend. The National Insurance savings outweigh the tax costs as our client pays corporation tax at a rate of 19%.
The above scheme sounds too good to be true. Can readers confirm that is the case? We implemented a similar scheme for another of our clients a number of years ago and are now concerned as to whether or not this will create any problems in the future.
Finally, should the issue of the shares be reported to the Inland Revenue as a tax avoidance scheme?
(Query T16,507)
