Will I get caught and what will it cost me?

If you have set up a Limited Company, are a knowledge-based worker and your spouse, parent, or sibling owns any shares in that Company, but do not actually earn income for the Company, then yes, you could potentially get caught.

Having said that, there are only about 50 cases a year that are actually enquired into at present. The Inland Revenue has vowed to clarify tax rules for the hundreds of thousands of 'husband and wife' companies that use dividend payment as a means of income.

If you do get challenged by the Revenue then to work out how much tax they will be asking for, just check to see how much your tax your spouse has paid on her income in the last 6 years at either the zero or basic rate of tax, then multiply that by 25%. Add to this interest compounded at about 6% a year on the outstanding amount and you will have a rough idea.

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