Readers' forum : Dividend distribution

Our married clients are equal shareholders in their trading company which provides the professional services of the husband. The wife is actively involved in the company in dealing with its administration and receives a salary at the National Insurance contribution threshold. The husband also receives substantial income in excess of £100 000 per annum from another source under PAYE. The wife has no other income. The husband owns an A share and the wife owns a B share. The shares are equal in all respects with the exception of the dividend entitlement.

Nearly all the reserves are distributed as dividends with about 80% allocated to the wife’s B share. It has been suggested that this arrangement is bounteous and that the Revenue would seek to reallocate the total dividend equally between the two shareholders. Do readers consider that this is correct?

We also have situations where non-family shareholders hold...