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Issue:
4451
/
Categories:
Comment & Analysis
, Arctic Systems
, income splitting
, Income Tax
, Inheritance Tax
, Trusts
Advantages and pitfalls of dividends paid to spouses and civil partners
KEY POINTS
- Splitting income between spouses or civil partners can be an effective tax-saving device.
- A reminder of the lessons from the Arctic Systems case.
- The Patmore case and separate classes of shares.
- Distributable profits and the danger of dividend waivers.
- Dividends for children other family members and unconnected parties.
Since the introduction of independent taxation many married couples (or civil partners) have made useful tax savings by structuring their affairs to ensure that both spouses use up their personal allowances and basic rate tax bands. In more recent times this practice has become known as income splitting or income shifting.
For owner-managed companies this strategy was considered to be a relatively easy one to implement. Typically the husband could gift or issue an...
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