FIRSTMATE BLOG: CAPTAINS LOG
LTCs and the Attribution Rules26.06.2014
Question
Our client provides IT services through a company. The company is owned 50/50 between our client and his wife, who carries out administration duties in the company.
We understand the attribution rules apply to our client since the company derives more than 80% of its income from one client, the company has minimal assets and our client’s income is over 70K for the year.
If the company was to become an LTC, would the profit be split based on the 50/50 shareholding, or do the attribution rules override?
Answer
The attribution rules will override the general transparency principle that applies to LTCs. Therefore if the attribution rules apply, the net services income derived by the LTC will be attributed to the person performing the services, and the LTC’s income will not be split 50/50 between the shareholders.
