Trusts, Shareholding & Dividends?
Discussion
Guys,
I am the sole director and majority shareholder (75%) of a Ltd Company. The balance of shares (25%) are held in a trust set up by the co-founder, my grandfather, now deceased. The beneficaries of this trust are my mother and brother who have no other interest in the business. The trust was set up with my knowledge as a inheritance tax avoidance measure and also to provide a financial bonus in the future should the Company be sold.
Now then, what I want to do is to pay myself salary upto personal allowance and take the rest of my remuneration as dividend. However, I do not want to pay a dividend to the trust proportional to shareholding. Both trust beneficaries are fine with this as they understand my wanting to pay dividend to minimise personal tax.
As the trust is the shareholder in this instance, how does one waive the taking of a dividend?
Will the IR see this as tax avoidance if not paying a 25% declared dividend into the trust?
Also the Companies pre-tax profits for this year 2004/05 will be less than the proposed dividend amount. There are however large retained profits from previous years in the P&L A/C.
Thanks for any advice.
I am the sole director and majority shareholder (75%) of a Ltd Company. The balance of shares (25%) are held in a trust set up by the co-founder, my grandfather, now deceased. The beneficaries of this trust are my mother and brother who have no other interest in the business. The trust was set up with my knowledge as a inheritance tax avoidance measure and also to provide a financial bonus in the future should the Company be sold.
Now then, what I want to do is to pay myself salary upto personal allowance and take the rest of my remuneration as dividend. However, I do not want to pay a dividend to the trust proportional to shareholding. Both trust beneficaries are fine with this as they understand my wanting to pay dividend to minimise personal tax.
As the trust is the shareholder in this instance, how does one waive the taking of a dividend?
Will the IR see this as tax avoidance if not paying a 25% declared dividend into the trust?
Also the Companies pre-tax profits for this year 2004/05 will be less than the proposed dividend amount. There are however large retained profits from previous years in the P&L A/C.
Thanks for any advice.
The execcutors/trustees of the trust can sign a "waiver" foregoing the dividend to which they would normally be entitled.
You should be able to pay yourself a dividend in excess of this year's profits provided accumulated reserves are sufficient. Otherwise you would be breaking the law and subject to a Section 419 Corporation Tax liability.
Be aware of the new rules on CT calculations when dividends are drawn.
You should be able to pay yourself a dividend in excess of this year's profits provided accumulated reserves are sufficient. Otherwise you would be breaking the law and subject to a Section 419 Corporation Tax liability.
Be aware of the new rules on CT calculations when dividends are drawn.
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