Dads and Lads activities reap dividends but at a cost.

Many of the Digital Native generation have found themselves with more time of their hands in the past year. The novelty of furlough has worn off and people have found new ways to fill their time. Playing the markets is one such activity. It is surprising popular amongst young adults with high levels of disposable income.

The popular markets for speculating on are stocks & shares and currencies. In our experience men (most are men) are encouraged into this activity by their Dads. They are the ones see that easy rewards can be made. To get started a Limited Company is set so trades can take place. The company will have named directors as with any other company formation.

We’ve seen examples where these companies have been successful in this line of business. Profitable too as the business has hardly any costs to cover. The company director pays the corporation tax due and pockets the rest as disposable income. Fast cars and sharp clothing follow soon thereafter!

Profit comes at a cost

Unfortunately, Dad had forgotten to tell the son (and the son never realised) that not all of the money left after corporation tax was his to spend. With dividend tax of 32.5% paid at the higher rate, there can be a big hole to fill in then the oversight becomes apparent.

In cases that we’ve seen, it’s not been HMRC that have first become aware. It’s been pension advisers who are asking their clients the origins of money based on their financial disclosure. When it becomes apparent the money may not all be theirs, they are referred to me to get them on an even keel and explain about the other taxes that need to be paid alongside corporation tax.

If this article is of interest and you know someone who maybe in a similar situation, feel free to contact us