Mark McLaughlin points out that a tax avoidance arrangement involving dividend payments towards university fees is under attack from HMRC.
In family and owner-managed companies, it is not uncommon for shares in the company to be spread among family members. This might be done for various reasons – both tax and non-tax related.
For example, the company’s shareholders might include an adult child whose parents control the business, or a trust in which the child is the beneficiary. Dividends might be paid on those shares, which go towards the child’s university fees and expenses.
There is nothing inherently wrong with dividends being paid and used in this way. However, HM Revenue and Customs (HMRC) has highlighted a marketed planning arrangement around dividends and school fees, which is considered to represent abusive tax avoidance.