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Ordinary B Shares

readerreader Experienced MentorMAAT, AAT Licensed Accountant Posts: 1,042
I may be coming at this a little late, but given the £5k (soon to be £2k) dividend allowance, is anyone else talking to clients about their company issuing Ordinary B shares to 'the spouse' (or anyone really) who already has other income from other sources?

Purpose of the B shares would be to pay dividends at a different rate to the ordinary shares.

Then to get around the settlements legislation (S.624, ITTOIA 2005) give the B shares full rights, e.g. voting, return of capital, surplus on winding up. appointing directors but ability to pay dividends at a different rate to the Ordinary shares.

Comments

  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,431
    Yes I have seen this done- spouse or adult children.
    I gained a new client where they had issued B shares to wife with no rights but dividends and highlighted the risk to the client when I took them on.

    To address your concerns @Mickdundee you can issue just 1 share giving only 1% control to the spouse.
  • readerreader Experienced Mentor MAAT, AAT Licensed Accountant Posts: 1,042

    Yes I have seen this done- spouse or adult children.
    I gained a new client where they had issued B shares to wife with no rights but dividends and highlighted the risk to the client when I took them on.

    To address your concerns @Mickdundee you can issue just 1 share giving only 1% control to the spouse.

    @MarieNoelle

    When you saw this in practice, was it in a 99:1 ratio or a 50:50 ratio?

    I have seen it a few times and always in a 50:50 ratio.

    I'm not sure if there is any underlying logic to this, e.g. give the other spouse/other person more control so that it appears to HMRC that the share issue/transfer/conversion is not just a right to income.

    Also, do you know if the share was simply just issued from by the company?

    Or was an ordinary share gifted to the spouse and then converted to an ordinary B share?
  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,431
    My comment re 1% control was probably a bit hasty and I have not seen it in practice.

    I have a few clients with 80 to 90% shares and the rest to family members (initial subscribers). Some have enough profits to declare dividends in equal proportion to shares to make full use of dividend and/or personal allowances so no need to create alphabet shares.

    The client mentioned before started as the only shareholder and 2 B shares were issued - one to him and one to wife (B shares only give rights to dividends). The previous accountants are an established firm of chartered accountants and tax advisers so would expect the set up to be above board.
  • yaqubyaqub Registered Posts: 3
    Tax is applicable but others will be applicable.
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