tax benefit of having Wife as employee/shareholder

[oldtimer45]

OK, as a result of neglecting my company finances and taking out too much money I will probably be facing a big tax bill, but my Wife, who has no taxable income has not been added to the Co as employee or director.

what is the money benefit of doing this now, and as I am shortly to produce some accounts, can I sort this out for the last fin. year retrospectively?

[SueEllen]

Firstly a director does not equal an employee. A director does not equal a shareholder. A employee does not equal a shareholder.

Secondly have a word with your accountant about the most tax efficient way in their view to run your company.

Finally you shouldn't be doing things retrospectively and they won't sanction it.

[Old Greg]

Firstly a director does not equal an employee. A director does not equal a shareholder. A employee does not equal a shareholder.

Secondly have a word with your accountant about the most tax efficient way in their view to run your company.

Finally you shouldn't be doing things retrospectively and they won't sanction it.

WSS - you can't do things retrospectively. If only it were legal, you could make out that your dividends to date were not dividends but a large director's loan (which there may be some interest at commercial rate on or BIK taxation due, I wouldn't know). You could then gift your wife shares and then declare a dividend while paying back the director's loan. Unfortunately, I expect this is illegal as you have already declared a dividend. Your accountant is your best bet.

[Wanderer]

OK, as a result of neglecting my company finances and taking out too much money I will probably be facing a big tax bill, but my Wife, who has no taxable income has not been added to the Co as employee or director.

what is the money benefit of doing this now, and as I am shortly to produce some accounts, can I sort this out for the last fin. year retrospectively?

I don't know if this is feasible or not but try this on with the accountant:

Presuming that there's no paper trail outside of your LTD company to indicate that dividends have been paid then what's to stop you saying that you didn't actually take any dividends so far this year, actually it's all been a "director's loan" which you intend to repay before 5th April by declaring a dividend thus avoiding paying tax on the BIK.

Note that the dividend you eventually do declare will balance out what you "owe" from your director's loan account and clear the director's loan. It will be a paper transaction so don't panic that you need to move £60k around your bank accounts! By the time you declare the dividend you will have made your wife a shareholder and so she gets half the divi.

Don't forget to tell the accountant about how much valuable work your wife has done for the company as your "personal assistant" and "researcher" and how you would like to reward her by paying her a salary up to the £6,475 tax threshold, co-incidentally using up this year's tax free allowance.

That's my take on it, I'm not even an accountant. Some/all of this may not even be possible/legal so you definitely want to get an accountant onto this one. Just watch that you don't say the wrong thing to the accountant or they might get prickly. Some are more willing to help with a bit of creativity than others.

Of course you should operate within the law at all times, tax avoidance is perfectly legitimate but tax evasion is a crime. etc etc.

[SueEllen]

WSS - you can't do things retrospectively. If only it were legal, you could make out that your dividends to date were not dividends but a large director's loan (which there may be some interest at commercial rate on or BIK taxation due, I wouldn't know). You could then gift your wife shares and then declare a dividend while paying back the director's loan. Unfortunately, I expect this is illegal as you have already declared a dividend. Your accountant is your best bet.

You forgot the joint bank account thing. But then we are talking about things you can't do anyway so it doesn't matter if they have a joint account anyway.

[Wanderer]

you beat me to the answer by two minutes.

I expect this is illegal as you have already declared a dividend.

What if you are the sole director and shareholder so there was no one else present at the board meeting to witness you declaring the divided and the minutes/dividend voucher (if any were ever created) quietly disappear.

Was a dividend actually declared? Did the meeting even take place? Perhaps it was a loan all along? If no one outside the company knows that this was supposed to be a dividend then what happens?

Or as an analogy: If a man walking alone in the forest says something and his wife isn't around to hear him, is he still in the wrong?

[northernladuk]

you beat me to the answer by two minutes.



What if you are the sole director and shareholder so there was no one else present at the board meeting to witness you declaring the divided and the minutes/dividend voucher (if any were ever created) quietly disappear.

Was a dividend actually declared? Did the meeting even take place? Perhaps it was a loan all along? If no one outside the company knows that this was supposed to be a dividend then what happens?

Or as an analogy: If a man walking alone in the forest says something and his wife isn't around to hear him, is he still in the wrong?

But you accountant would consolidate your figures against your bank statement? No decent accountant would overlook outgoings to a personal account and then take a fudged excuse and action knowing full well in his professional opinion you are pulling a fast one surely?

I would say your analogy was flawed as you don't include the accountant.

[SueEllen]

you beat me to the answer by two minutes.

I'm sure the original poster worked out what was implied was illegal anyway and aren't encouraging him to do anything, so I don't think your post above this is needed.

[SueEllen]

But you accountant would consolidate your figures against your bank statement? No decent accountant would overlook outgoings to a personal account and then take a fudged excuse and action knowing full well in his professional opinion you are pulling a fast one surely?

I would say your analogy was flawed as you don't include the accountant.

There is nothing stopping you moving money around if you haven't spent it all.

[Wanderer]

But you accountant would consolidate your figures against your bank statement? No decent accountant would overlook outgoings to a personal account and then take a fudged excuse and action knowing full well in his professional opinion you are pulling a fast one surely?

Not fudged at all, it was a director's loan. Nothing wrong with that, I'll pay it back. (Well, it's actually illegal if it's over £5k but that law is to protect shareholders and since the director is the sole shareholder no action is going to be taken)

I'm sure the original poster worked out what was implied was illegal anyway and aren't encouraging him to do anything, so I don't think your post above this is needed.

Yes, in hindsight you are quite right. I feel all dirty now for even suggesting such wrong things and I hope the original poster would understand that we could never condone this type of tax avoidance.