Hi All,
I have been looking through the forums and have found posts that partially cover the below topics separately but if this has already been answered correctly please forgive me for re-asking
i am looking for a tax expert to reassure me that we have not done anything questionable with regards to my current tax arrangement
My question is around trust taxation and i have laid out the main points below (in order of events)
LTD set up to run my contracting company and property development business
3 classes of shares have been set up (A, B C)
A shares held by me (only source of income is this Ltd) B shares held by my wife ( has a basic rate PAYE 2nd income)
The C shares are held in trust for my minor children (no other income)
Upon set up of the company my parents (the grandparents of the Minors) placed £20 in a discretionary trust for the children (me and my wife as trustees)
The 20 was then used for the initial share capital of the company by purchasing the C shares
A deed of variation was then used to create an interest in possession trust
Dividends were subsequently declared on the C shares and paid direct to the minor children (bank account in their own name, dividends circa 25k across the two minor beneficiaries)
This was then declared as dividend income on the self assessment return for the minor children (no tax due as under the PA)
The advice and trust deed was drawn up by a solicitor who is also a CTA. The reason i am posting to this forum is for a conceptual second opinion (and to whether or not i would be wise to seek a full second legal opinion)
There are a number of points I wanted to have some reassurance on
1. Is the use of alphabet shares paying different levels of dividends (we are paying up to the PA for each of the holders) a sensible idea?
2. I know the payments are taxed using the minors tax rates however are we likely to come up against any issues in regards to settlement legislation or GAAR?
3. How likely are HMRC to challenge the above and generally how defensible is the above strategy if challenged by HMRC?
I also had a further idea that i have not had advise on yet.
4. In future would it be possible to use the dividend payments paid directly to the Minors to loan back into the company (creating a shareholders loan) and then can the company pay interest up to the Personal Savings Allowance and the Savings Rate Band back to the minors directly? (much in the same way i am currently doing for the directors loan balance)
I wanted to make sure the above is as watertight as possible BEFORE any challenge from HMRC (question 4 is just a theoretical question of something I have been thinking about and will take paid for advice on before implementing).
If this is too much of a detailed question for the forum please accept my apologies but as i have already paid for advice on this i wanted a qualified opinion as to whether or not i should take any further advice or action.
Thanks in advance
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