Ltd Company - Joint Share holders

**malvolio** · 14 April 2010, 08:22

You can ignore income shifting, it doesn't exist. Divis have to be paid in the ratio of shares held. There's nothing to stop you having a share allocation that reflects fee-earning abiility, either by redistibuting the ones you have or having two classes of shares (which is messy and frankly unnecessary). Or you couold veryu easily argue that as a joint venture between a married couple, you share the risks - and hence the rewards - equally.

And get a new accountant; yours is out of date.

**biggles_1** · 14 April 2010, 09:03

So what does it actually mean for me

Hi Malvolio,

I was in a forum discussion for this a couple of weeks back as I am not married and my partner is considering whether she will go back to work or not after maternity leave. This would probably have a big effect on the decision.

It was suggested by my accountant, even after going back to them with the comments from this board, that if I were to sell her half the shares and pay her half the dividends it would be seen as income shifting and there would be CGT (On which part I'm not sure) implications. I don't know how we would value the shares but I would guess they should be the same as what I paid for them initially.

As far as I can see if she pays me for the shares and then dividends are paid into personal accounts then it is a business partnership between two effectively unrelated parties (If we get counted as related then surely the married dispensation on gifting would apply anyway). I then have no say what she does with that money.

I'm a little bit lost as to what even the responses on this forum boiled down to really. I started the company with 100 £1 shares so if I sell her half for £50 and then give her half the dividends, especially if she is made a director, then surely this is a business arrangement where we both take the risk of directorship.

I think the accountant is playing it safe but don't see how, if I were to sell half the shares to a friend and then give him half the dividends it would be a problem if I had no say over what he did with it so I don't see the difference.

Malvolio - Could you give me any short simple summary of what you think the implications would be? Say turnover of £100k to make numbers simple and shares purchased for £50 for 50%. Can you see any reason that this would not be allowed or what tax would be liable for CGT? Would the £50 sale price be reasonable?

Is there an accountant that can be suggested that is not one of the out of the box main ones that stick to their processes and use grads/trainees to implement the majority of the work but punching figures into spreadsheets?

Cheers

J.

**Stag Cozier** · 14 April 2010, 09:58

Not being married exposures you to the settlements legislation. You are only exempt from this if you are married. However, as you are both fee earners the shareholdings should reflect the commercial reality.

If one shareholder creates 60% of the company's income, why not have the shareholdings to reflect 60:40. You can transfer 10 shares from 1 holder to the other at NIL value and treat it as a correction of wrongly issued number of shares to that person.

If you do decide to change the share classes to A and B and pay dividends independently of each other, then be aware, you could be exposing yourself to unwanted attention from HMRC (although, I think the percentage is that small it's not worth losing sleepness nights about it). Just ensure that both types of shares (if you decide to go down this route) have the same rights to income and capital etc.

**Iain-Le-Roi** · 14 April 2010, 10:17

Are the accountants just being very cautious then? It sounds as if the best thing to do is work out the proportion of income and then split the shares accordingly. Is there any way I should be doing this to ensure that we are being as compliant as possible, should they be valued and then the money passed over?

Could someone please explain in simple terms the best way I should do this?

**moorfield** · 14 April 2010, 10:31

Originally posted by Iain-Le-Roi View Post

This creates a bit of a problem as it means that the money cant be split as it is earnerd.

Er, sorry to pry, but why is that a problem for you if you two are getting married ?

**Iain-Le-Roi** · 14 April 2010, 10:40

Originally posted by moorfield View Post

Er, sorry to pry, but why is that a problem for you if you two are getting married ?

Not sure how that really adds to the discussion but we are young, not married yet and still have lots of seperate outgoings so in the short term at least keep most of our finances seperate (obviuosly aside form utility bills and mortgage, food etc). Again, not really sure why I am telling you this????

**northernladuk** · 14 April 2010, 10:57

Originally posted by Iain-Le-Roi View Post

Not sure how that really adds to the discussion but we are young, not married yet and still have lots of seperate outgoings so in the short term at least keep most of our finances seperate (obviuosly aside form utility bills and mortgage, food etc). Again, not really sure why I am telling you this????

Because you asked a question based on your relationship and therefore the answers will also be based on your relationship. Depending on the stage the answer will be differnt so not unreasonable to ask.

If you were in a long stable relationship then the question would be very valid. Why bother about it. If you want to ask a question based on your personal circumstances you have to be prepared to give full information of your circumstance to get the best answer surely????

If you are that bothered about keeping things seperate in the early days personally I would have gone for two diff companies and keep work and finances right out of the way of the relationship until I am absolutley sure regardless of a bit of extra cost for admin etc.... Costs a lot less then if it all goes tits up.... but then I have been burned by this in the past so once bitten twice shy.

**lje** · 14 April 2010, 11:01

Another option would be to pay different salaries - so one of you gets a larger salary than the other in order to make up for differences in earning potential. You'll pay more taxes this way but it does leave the dividends as an equal split.

The salary difference could be paid as a bonus once a year (say) when you know what the actual difference was in your earning over that period.

**northernladuk** · 14 April 2010, 11:04

Why doesn't the lower rate earner just give some cash back to the higher rate person or take it upon themselves to pay a set of bills/outgoings to even it up? Leave the paperwork alone, keep Hector at bay and deal with it between yourselves?

Ltd Company - Joint Share holders