New queries, issue 4380

Arctic currents

My client has set up a one-man company that will earn about £40 000 a year after a salary equal to personal allowances and corporation tax on the rest. IR35 is not an issue. For the next few years my client will have to support his daughter who is at university (and over 18).

If he pays a dividend of £40 000 and gifts some of it to her he will pay higher-rate income tax. If instead he gives her 20% of the shares in the company he can pay himself a dividend of £32 000 (which he reckons is enough for him to live on) and her £8 000 and there is no further income tax to pay.

I have told him that the arrangement must be genuine and will be enduring; he is happy with that. He believes...