Share classification question

[DSLiverpool]

One of my businesses is a
46/45/9 split with 3 directors.
All class A or normal shares all equal.

The 45 director wants to take the £758 a month wages to cover NI but myself as the 46 director doesn’t need to.

Can we change the share classifications to reduce the dividend the 45 director gets as they’ll have income from the £758 (ish)

I get my £758 from another one of my projects.

[springfan62]

Yes you can change the shares into A,B and C shares with exactly the same rights as before so you can have different dividends for different shareholders.

[MaxFromage]

The short answer to your question is no.

On the face of it, you want to reclassify shares for a tax advantage. HMRC would not accept that if queried. A share reorganisation must be done for commercial reasons, so you will need to speak to your accountant to understand how (and for what purpose) you can make changes.

[DSLiverpool]

Ah ok conflicting - I’ve a decent accountant but need to be forewarned.

I’m not seeking an advantage I just don’t want to pay 45% person a divi and £758

[Jockman]

Your Accountant will sort this for you without any issue Dave. Your Articles will need checking and the correct forms need to be filed.

Grant Thornton did this for us many years ago.

[Panamax]

MaxFromage said:

The short answer to your question is no.

On the face of it, you want to reclassify shares for a tax advantage. HMRC would not accept that if queried. A share reorganisation must be done for commercial reasons, so you will need to speak to your accountant to understand how (and for what purpose) you can make changes.

^^^ is the correct answer. Whilst you can theoretically and legally have "alphabet shares" the practical reality is HMRC can drive a bulldozer through it any time they like. Definitely best to steer well clear.

At the simplest, a fancy share structure needs to have a genuine business purpose and not just be a mechanism for tax/NI avoidance.