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A business is carried on through a one-man limited company. The director’s daughter is attending university and it is suggested that, to pay for her support, 20% of the shares are gifted to the daughter who will receive dividends
My client has set up a one-man company that will earn about £40 000 a year after a salary equal to personal allowances and corporation tax on the rest. IR35 is not an issue.
For the next few years my client will have to support his daughter who is at university (and over 18).
If he pays a dividend of £40 000 and gifts some of it to her he will pay higher-rate income tax.
If instead he gives her 20% of the shares in the company he can pay himself a dividend of £32 000 (which he reckons is enough for him to live on) and her £8 000 and there is no further income tax to pay.
I have told him that the arrangement must be genuine and will be enduring; he is happy with that.
He believes that his daughter will...
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