Showing posts with label settlements legislation. Show all posts
Showing posts with label settlements legislation. Show all posts

Monday, November 12, 2012

What is the settlements legislation?

Sharing dividend income from a limited company with a non-fee-earner has been a classic tax avoidance tactic employed by consultants, contractors and locum doctors who operate through limited companies. It is useful as it allows the use a non-fee-earner’s tax allowances and progressive taxation rates in order to save significant tax.

However, unless the non-fee-earner is a spouse or civil partner qualifying for a spousal exemption, HMRC could treat all the company’s fee income as that earned by the contractor, and tax them accordingly. The settlements legislation will apply if a contractor gives shares in their contractor limited company to a partner, family member or friend who does not work in the business yet receives an income.