Tax Advice for the Royal Couple (and others)

With William and Kate having now ‘tied the Royal knot’, they will now need to come down to earth and ensure that, like all married couples they sort out their tax affairs to their best advantage. Married couples allowance has long been removed for everyone born after 6th April 1935, so how can William and Kate take advantage of the tax regime?

 

If William forms a new ‘air sea rescue service business’ he may well wish to consider involving Kate. There will be plenty of records to maintain, emergency calls to answer and he could consider paying her ‘wife’s wages’ to remunerate her work in this area. If Kate is not working (her charity work being unpaid), or has a low paid part time job then her salary will be initially covered by her own personal allowance and the balance assessed at 20%.  William should not pay more than the commercial rate for her duties so she is unlikely to become a higher rate taxpayer. (As with any business considering the purchase of new plant and machinery, if William wishes to buy a new helicopter he should do so before April 2012 when the 100% capital allowance currently available on expenditure up to £100,000 reduces to £25,000).

 

If the business is a limited company it would be an idea to consider making Kate a shareholder in the newly formed company. (There could be ‘issues’ if this is done after the company has been trading for some time and professional advice should be sought.) The advantage of this is should the company be sold at a later date, the disposal proceeds would be assessed to capital gains between them both and they would each be able to claim their own annual exemptions and entrepreneurs relief resulting in the first 10 million of the gain after the taking off the annual exemption, being assessed at 10% (subject to certain conditions) rather than18% or 28%.

 

Another advantage of Kate being a shareholder in Williams’s business would be that some of the profits could be voted out as dividends which is usually more advantageous than as a salary, but again professional advice should be taken.

 

If the business is not incorporated then William could consider making Kate a partner. Again a future disposal of the business could well be shared between them and lessen the impact of capital gains tax. Her profit share would be taxed utilising her possibly lower rates of tax.

 

As there is no capital gains arising on the disposal of any shares to a spouse (or civil partner) they could also look to transfer other shares between themselves each year to take advantage of any otherwise unused annual exemptions. If Kate is not initially a shareholder of Williams air sea rescue business but later becomes one, it may be possible to transfer shares to her at least one year before selling the company to obtain entrepreneurs relief but as mentioned, care and advice is required before taking any action as H M Revenue & Customs could attack the move if they do not like the motive behind it.

May they have a long and happy marriage!

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