Giving spouse shares

[DDt]

Hello Forum

We are a company with 3 directors, for tax avoidance we are thinking of making our wife’s joint shareholders. To follow the HMRC rules your spouse has to have voting rights. Can you place conditions on what resolutions they can vote on? For example, on the sale of the company, would the HMRC see this as a restriction which would be against the rules?

 

[FriendsInvest]

Hello there!

You’re right to tread carefully here—HMRC has strict rules on spouse shareholdings to ensure these aren’t simply set up for tax avoidance purposes.

For your spouse’s shares to qualify as genuine voting shares (and thus be compliant with HMRC requirements),they generally need full, unrestricted voting rights. If you restrict their rights—such as limiting their say on key decisions like a company sale—HMRC might view this as an artificial arrangement. This could raise red flags and potentially lead to them treating these shares as not genuinely held by your spouse, nullifying the tax benefits.

Here are some points to keep in mind:

1. Voting Rights: For the shares to meet HMRC’s “genuine voting rights” requirement, spouses should ideally have the same voting rights as other shareholders. Restrictions on voting rights can lead to challenges if HMRC deems these shares “restricted” or “non-voting” in practice.
2. Dividend Rights: HMRC also considers whether dividends paid to spouse shareholders are a fair reflection of their role in the business. If they don’t have an active role but receive significant dividends, HMRC may scrutinise this more closely.