Son working through my ltd company, can he take a dividend.

[martinc64]

Hi All

First post so be gentle with me...............

I run a ltd company with shares and divis split 50:50 with my wife.
My son works full time doing a normal PAYE job, but has landed some freelance work as well. It will probably only be for a few months, and will gross around £6k + vat.

We want to bill for the work through my ltd company, but wonder what is the best way to pay him, as he already has a full time job.

He could register as self employed ( sole trader ) and I could pay him from company, then he could catch up the tax on his Self Assesment.

Or is there a way of paying him a special dividend for the work, to take advantage of the £5k dividend allowance ?
Could I issue him with a different class of share that would allow this ?

Can I just re-iterate that this is a real contract for real work he will be doing.

Thanks in advance

Martin

[cojak]

If it's freelance and only for a few months why doesn't he just declare it on his SA at year-end?

It doesn't need to go through your company, does it?

[TheCyclingProgrammer]

If your son is younger than 18 then there's a very strong possibility (i.e. almost certain) the arrangement will be caught by s629 of the settlements legislation. If they are over 18 then its still likely to be very messy and complicated (what do you do once his contract is over?) and there's still a potential risk under the settlements legislation, so I wouldn't bother going down that route.

The best thing to do would be to have your son register as self-employed. If possible he should contract directly with the client however if they are unwilling to directly contract with somebody self-employed then have them contract with YourCo and take care of the billing arrangements and have your son bill YourCo for his time at the same rate that you are billing the client.

The whole thing should be tax neutral for YourCo and your son will declare his income on his tax return.

If your son expects to have more contract work like this in the future then it may make sense at some point for him to set up his own company.

[Patrick@Intouch]

I guess because of the income tax at either basic pr higher rate that will apply to the income if declared as sole trader income as compared to the nil% tax on the £5,000 dividend allowance.

This is tricky and for the sums involved may not be worthwhile.

You would need to look at the value of your company and potential stamp duty on the transfer of shares as well as capital gains to yourself on disposing of those assets.

Settlements legislation may also be an issue to be aware of.

[LondonManc]

Is Umbrella not an easier option?

[martinc64]

Hi All

Just to clarify things.
Agency wants to pay through Ltd company, and he doesn't know if he will get any more work, so was going to use mine to start with, rather than set up his own.
He is 20 years old.
Settlement legislation was my main concern, but thought it wouldnt apply as he was doing real billable work for my company.

Do I need to pay him at all through company ? could I pay him personaly and keep the company money for myself.

Martin

[RonBW]

Could I issue him with a different class of share that would allow this ?

Even if you aren't caught by the settlements legislation, creating a new class of share and issuing that to him for only a couple of months work seems like a lot of work for only a little bit of gain.

[Platypus]

Invoice through the company. Get him to invoice you as S/E and he puts it on his tax return at the end of the year.

Just an idea.

[DaveB]

Invoice through the company. Get him to invoice you as S/E and he puts it on his tax return at the end of the year.

Just an idea.

This.

As long as all the numbers line up there should be no impact and no need to mess about with shareholdings. You bill including VAT and pay him the same rate less VAT as SE and include the VAT element on your next return.

[WordIsBond]

Invoice through the company. Get him to invoice you as S/E and he puts it on his tax return at the end of the year.

Just an idea.

Take a 5% cut off the top. Tell him its for that time he dinged your car.