University Fees Tax Planning

04/11/2016

If you’re a business owner and considering a tax planning strategy to fund university fees, you could consider the transfer of shares in your company to your children. But will this fall foul of HMRC’s tough anti-avoidance rules?

HMRC’s attitude to shifting income is often misunderstood. In most situations it has no objection, even where you save tax. It will allow you to give away assets unless you or your spouse can still benefit from the income they generate or you’re giving the assets to your child. In these situations it has special anti-avoidance rules to cancel any tax advantage. However, when your youngsters turn 18 the anti-avoidance rules no longer apply.

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But how much tax could be saved by shifting income to them?

Example. Bill expects to have to find £9,000 per year to pay for accommodation and living expenses for his son while he’s at university. Funding this from his company dividends will cost Bill £2,925 (£9,000 x 32.5%) in extra tax each year. But if he gave his son enough shares in his company, to produce annual dividends of £9,000, this would be entirely tax free.

If Bill wasn’t keen on his son owning shares, there’s also a way to structure the gift in such a way the shares could be non-voting shares.

If you would like to discuss how our accounting services can be beneficial for your own particular situation, please contact us >>

By Tony Czypionka | Accountant and Tax Adviser

Tony is the Accountant and Tax Adviser at Mantle Financial Planning Read more >>

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