Spouses On The Payroll

[WordIsBond]

Last question, for those with a spouse do you pay salaries into join accounts or separate?

Yes, both.

We have only ever had joint accounts, but we had joint accounts in more than one bank. Every payment to my wife goes into one of those accounts -- salary, dividends, expense reimbursement, even rent. Every payment to me goes into a different account. If you start getting child benefit and it is paid into the account her payments go into, that makes it easier to argue, "Those are her funds." If you then, every couple of months, transfer all funds into the main household account, well, obviously you are both contributing to the costs of the home, right?

My accountant said this is not necessary. But it was painless to do since we already had the accounts.

Some things ARE important.
1. Make sure the payments are not lumped together. Make a payment in your wife's name, then make a payment in yours. Two separate payments, with the individual as the payee showing in your business account. One payment clearly says it is to SimonMac, one clearly says it is to Mrs.
2. Make sure salary and dividend payments are not lumped together. She should get one payment for salary, another for dividend.
3. Make sure you issue dividend vouchers. Electronic is ok but I also print them and file them, one copy goes in her personal file for her dividend, one in mine, one copy of each goes in company file.
4. Make sure you do RTI for salary payments for each of you.
5. Don't mess around with dividend deferrals/sacrifice. Pay the same dividend per share to each of you, always. That kind of game raises suspicions, rarely worth it.

[Eirikur]

Last question, for those with a spouse do you pay salaries into join accounts or separate?

Salary in joint accounts, but dividends into separate.

[No2politics]

Congratulations by the way.
Do you make company pension contributions? If so it might be worth making them personally. This would extend your basic rate by the gross contribution and allow you to declare more dividends. This is beneficial if your wife has no income as it allows you to make use of all her basic rate.

[yMyjgT]

Some things ARE important.
1. Make sure the payments are not lumped together. Make a payment in your wife's name, then make a payment in yours. Two separate payments, with the individual as the payee showing in your business account. One payment clearly says it is to SimonMac, one clearly says it is to Mrs.
2. Make sure salary and dividend payments are not lumped together. She should get one payment for salary, another for dividend.

Just wondering why you think that is? I currently lump everything in one transfer. Is the reasoning, to make it clear to tax man (during an investigation for example) what the exact reason for the transfer was?

[stek]

Just wondering why you think that is? I currently lump everything in one transfer. Is the reasoning, to make it clear to tax man (during an investigation for example) what the exact reason for the transfer was?

Oh dear....

[WordIsBond]

Just wondering why you think that is? I currently lump everything in one transfer. Is the reasoning, to make it clear to tax man (during an investigation for example) what the exact reason for the transfer was?

Yes, that's the reasoning.

Technically, if you have the dividend voucher and you file RTI, so you have clear paperwork, you can probably get away with this. But if you are ever investigated, when they see what you are doing you are going to have a lot of explaining to do.

You are running a business, right? So treat it like a business. No business pays salary and dividends in a single lump sum transfer. They pay their employees when they do payroll. They pay dividends out of after-tax profit to their shareholders. Start acting like a business, or HMRC will come along someday and decide you aren't a business, and things will get ugly. If your bank charges a nominal fee for the extra transfer, pay it. You'll recover it, plus a lot, if HMRC ever comes investigating, compared to the time and cost of defending the whole mess if your banking practices look suspicious.

[yMyjgT]

Thanks, understood. I'll talk to accountant about it and will change the way I'm doing it.

No business pays salary and dividends in a single lump sum transfer.

....but also, purely for the sake of argument ....why shouldn't a small (i.e. 1 man band) business take advantage of the fact they're a small business, that doesn't have teams HR/accountants/finance people, and just do 1 transfer? In fact, why waste time splitting things out, changing the description of the transfer?
Again, if you're a one man band, why shouldn't you be able to have some flexibility on when you make the transfers? What's inherently wrong with that? e.g. I'm away on business, or holiday, I'm a one man band, I'll do the transfer for PAYE when I get back.

[FrontEnder]

Thanks, understood. I'll talk to accountant about it and will change the way I'm doing it.

....but also, purely for the sake of argument ....why shouldn't a small (i.e. 1 man band) business take advantage of the fact they're a small business, that doesn't have teams HR/accountants/finance people, and just do 1 transfer? In fact, why waste time splitting things out, changing the description of the transfer?
Again, if you're a one man band, why shouldn't you be able to have some flexibility on when you make the transfers? What's inherently wrong with that? e.g. I'm away on business, or holiday, I'm a one man band, I'll do the transfer for PAYE when I get back.

Because if you're a director of a company you own, you're running a business. You're not a "one man band".

[WordIsBond]

....but also, purely for the sake of argument ....why shouldn't a small (i.e. 1 man band) business take advantage of the fact they're a small business, that doesn't have teams HR/accountants/finance people, and just do 1 transfer? In fact, why waste time splitting things out, changing the description of the transfer?
Again, if you're a one man band, why shouldn't you be able to have some flexibility on when you make the transfers? What's inherently wrong with that? e.g. I'm away on business, or holiday, I'm a one man band, I'll do the transfer for PAYE when I get back.

Purely for the sake of argument.

If you want HMRC to tax the two amounts the same way, by all means, do them together. But don't be surprised if they say that if they are done together, your "business" is a fiction, and then they'll decide the most painful way to tax your income. And if you end up in court fighting them, you have to convince the court that it actually was a business.

If you want them to tax the two amounts differently, one a payment to someone who works the business, and one a payment to a shareholder who owns shares, then treat them differently. The fact that the shareholder happens to be the same guy as the person who works in the business is irrelevant to taxation, and it should be irrelevant to business practices.

If you want to have a business, run it like a business. If you can't be bothered to learn what that means and do it, your tax investigation, when it comes, is likely to turn ugly. I'm NOT going to say YANCOTBAC, but you need to ask yourself if you are, if you are seriously asking the question.

[TheCyclingProgrammer]

I'm not really buying this argument that HMRC could argue a single payment is in fact for one thing when all the paper evidence clearly shows it as another. Typical paranoia without any evidence to back it up, as is common on this forum.

For instance, there is absolutely no reason why your salary (once you've filed the RTI submission) and dividend (having drawn up all the correct paperwork) couldn't both be credited to the directors loan account, to be withdrawn at some point in the future. Then, when the time comes you pay yourself £xxx (whatever the balance owed to you on the DLA is). Does that make a difference? Of course not.

Its the paper trail the matters, not when and how you move the money and frankly the idea that keeping the payments separate is "running a proper business" is rubbish. Its far more important to make sure your dealing with your PAYE correctly on any salary payments, drawing up the correct dividend paperwork (and ensuring there is sufficient profit at the time) and keeping records for any expenses. THIS is running your business properly.

If you owed a supplier money across multiple bills, would you send them separate payments for each bill or one lump sum? Its the same thing.