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Where Taxpayers and Advisers Meet
Using Your Family to Avoid Paying Tax? Shameful!
17/03/2015, by Lee Sharpe, Tax News - Income Tax
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There are numerous reports in the press about a well-known television presenter, whose daughter also owns shares in his personal company. The suspicion of many is that this is underhand tax avoidance, assuming that the presenter’s daughter receives dividends which will not be as heavily taxed as they would be, if they were solely in the presenter’s name.

I suspect, however, that many of those outraged newspaper readers would not think twice about employing their children or spouses to undertake administrative work in their business, utilising their relative’s tax-free Personal Allowance, etc. HMRC will not blink, of course, provided the level of payment is in keeping with substantive work done.

In any event, many TW regulars will be aware that, paid work aside, where a parent provides funds to a minor child that yield investment income, it will normally be reflected back onto the parent as part of the Settlements Legislation ITTOIA 2005 s 629 if it is of any substance (i.e., more than £100). So at first blush, Income Tax avoidance seems unlikely as a motive – or at least, dangerous to presume.

It is perhaps worth mentioning that, at least so far as spouses are concerned, tax avoidance per se largely didn’t exist until c1990, when spouses started to be taxed independently of each other, rather than as a single unit (couple). So, it may in turn be argued that the government of the day was largely responsible for manufacturing quite a bit of the family-scale tax avoidance that has, nominally, taken place since – or, perhaps more precisely, subsequent governments’ rather less favourable re-interpretations of what, at the time, seemed a fairly straight forward, sensible and permissive approach. Let's remind ourselves of what the good Chancellor (not this currrent one) said back in the good old days - 1989, I think:

"Independent taxation is bound to mean that some couples will transfer assets between them with the result that their total tax bill will be reduced. This is an inevitable and acceptable consequence of taxing husbands and wives separately".

Perhaps one way to significantly curtail family-scale tax avoidance is to abolish independent taxation and get back to the good old days..? No? I'd be in a party of one, I expect.

Lastly, I should thank said presenter for getting me to #27 on my attempt at “50 Shades of Tax Avoidance”. On reflection, at this rate, it seems likely that I shall not make the full 50 until the sequel is out. But at least the endeavour will keep me out of mischief.

About The Author

Lee is TaxationWeb's Articles & News Editor and writes for TaxationWeb. He is a Chartered Tax Adviser with experience of advising individuals and owner-managed businesses over a broad spectrum of tax matters.
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