Dividend gifting

[Kungfupanda67]

My husband is a shareholder in a family business. This year with his dividend payment he is going to be taking home about £58,000, so we will be losing most of our child benefit. I earn very little, I work very part time, we have 3 young children. The £200 a month child benefit will make a big difference to us.

What I’ve just suggested is that he gifts me some of his shares, so that the dividend payment doesn’t take him over £50k. However, I think I’d like there to be some protection for him so that if we divorced he would get his shares back - is that possible? Could we have a legal contract to say in the event of a split I have no say in the company?

Thanks for any help :)

Have you ever been investigated by HMRC, OP? This isn’t something I’d go near with a barge pole. There’s a reason child benefit is lost above a certain income. You’ll already pay less tax than if that income was PAYE. What you’re suggesting is tax evasion.

It’s not tax evasion, it’s tax planning. It’s perfectly legitimate to gift shares of a business, his own shares were gifted to him by his dad. Wives are often shareholders in their husband’s companies.

He could choose to put the £8000 into his pension, thereby ‘avoiding’ tax on it and not losing child benefit.

I just wondered if it was possible to contract the return of gifted shares if we did divorce?

Wives are often shareholders in their husband’s companies.

I own a company with my husband. I also have a PAYE job. I know exactly how it works because I do all of the books for our company. I’ve also had to do a random VAT investigation, and believe me you don’t want anything that could be construed as evasion. If shares were given without condition it would be fine. Conditions regarding return on divorce imply it’s far from kosher.

Its fine for him to gift you a share of the company.

However to get a legal document drawn up saying you will give it back is implying its not a gift to you.

Could your dh not just trust that you will sign over your share in the event of a divorce?

He probably would, all of our savings are in my name (purely because I manage our finances). It was my idea to put it in writing, more for his dad, brother and brother-in-law’s (the others in the business) peace of mind really.

But very good point about it suggesting it’s not all proper by putting it in writing, thanks. We’ll have a think

@MoreSlidingDoors That’s such appallingly bad advice. I’m not sure if you’re just recklessly misleading OP or whether something more sinister is going on.

@Collaborate do you think it would be fine then? We’ll be asking the accountant regarding the tax side, but I’m fairly confident that’s fine. It’s the contract that I’m worried about.

The transfer of shares now would have little to no effect on divorce. the court would most likely treat the value of shares the same whether or not they are transferred.

It's ignorant beyond belief to call this tax evasion.

You need to speak to a tax accountant.

This is simple stuff.

Firstly, any transfers between spouses attract no CGT. You would inherit the shares at your husband's base cost.

The only effect this would have tax-wise is what I think you already know. It reduces your husband's income below the threshold for child benefit and increases your. Further, it means your husband doesn't pay as much tax at 40% and any tax you pay is at your (presumably lower) marginal rate.

Child Benefit should be based on total household income not on whether or not one partner earns more than 50K. If both partners earn 49K each they would be entitled to child benefit. However, a household with one earner only who earns 60K (unless limit has been raised) would receive no child benefit. Crazy.

@java2019 it is crazy. We have a decent income but live outskirts of London so we can’t afford to lose £200 a month :(

It’s certainly not tax evasion. If the wanted they could insert a right of buy back on divorce in the company’s articles to protect themselves. Or you could just contract to do so as long as you were paid what they were worth.