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  1. #1

    Still gathering requirements...


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    Default Should I employ myself and my wife to pay salary?

    Hello,

    I am contracting via own limited company.

    I heard I will need to pay less tax if I employ my wife (she is not working) and make her 40% shareholder of the company.

    Now I need to pay to myself and my wife minimal salary (about 700 monthly to each of us) and the rest pay myself and her as dividents.

    My question is: do I need somehow oficially employ myself and my wife or I just need to transfer money to our bank account (as we have common accont with her) and record this as salary to me and her? Should I oficially issue salary slips to us?

    Thanks in advance...

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    Default

    You'll need a PAYE scheme set up and then ask your accountant to calculate your salary for you on 700 net wage per month each. They should be able to send you a wage summary detailing what your wages are and the PAYE owed to HMRC. If this is the first job your wife has had in this tax year, then you'll need to process a P46 so that you can get her on the right tax code to start with so she pays the right amount of income tax.

    Payslips aren't compulsory and if you have a wage summary, you'll know exactly how much you pay yourself each month.

    To make your wife a shareholder( if not one already), you'll either need to allocate her shares which can be done online at companies house using webfiling, or make a share transfer out of the ones you own e.g. if you hold 100 ordinary shares, you can transfer 40 to her so you hold 60.

    Columbo moment: one more thing - Take advice from your accountant as to what salary levels you should both consider

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    Thanks for your answer!

    My accountants ignore me, I will leave them.

  4. #4

    More fingers than teeth

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    Default

    This is asked weekly and is a hot topic. What you want to do is blatent avoidance so there is an element of risk you have to understand and be happy with. Giving her shares if you have a big lump in the company will certainly be a problem.

    I will try dig a few of the longer threads out.

    Oh this is also covered in detail in the newbie guides to the right. Read those first.
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    More fingers than teeth

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    Default

    http://forums.contractoruk.com/accou...e-company.html

    http://forums.contractoruk.com/accou...d-company.html

    All threads here

    wife site:forums.contractoruk.com/accounting-legal/ - Google Search

    There is also a question hanging over making your wife a partner in your company. It can go horribly wrong if you start having problems. She will own half your company.
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  6. #6
    ASB
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    Quote Originally Posted by northernladuk View Post
    There is also a question hanging over making your wife a partner in your company. It can go horribly wrong if you start having problems. She will own half your company.
    In reality it should make little difference. The company will be matrimonial property anyway. As such it's value just goes into the pot of assets to be split. Though actually agreeing a value can be difficult. Retained shareholders funds less the productive depreciating assets is probably a fair starting point.

    I do take the point though that if the spouse is a significant shareholder it can make the process more difficult if they are reluctant to pass their shares to the other spouse at a realistic price.

    If the couple are unmarried then of course it would not (currently) be split upon seperation, so from this point of view adding a partner to whom you are not married as a shareholder exposes greater financial risk.

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    Quote Originally Posted by ASB View Post
    If the couple are unmarried then of course it would not (currently) be split upon seperation, so from this point of view adding a partner to whom you are not married as a shareholder exposes greater financial risk.
    Not being married opens the possibility of a settlements legislation investigation as well - Arctic settled it finally for married couples, since there is an explicit exemption for married couples.

    If not married, then you are probably going to get stuffed under the Ramsay principle.
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  8. #8

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    Default IR35

    Hi Andrew,

    Employing your wife is common practice, but be warned that HMRC look closely at such arrangements in a small business, and you may be asked to justify her contribution to the functioning of the company for the deduction of her salary to be allowable for Corporation Tax purposes.

    From what you say in you query, I suspect you might be subject to the IR35 rules. If that is so, then it will be of no benefit to employ your wife, as the allowable deductions under IR35 are fixed and very limited. Take advice from your accountant, if you have one, particularly as HMRC are tightening up on IR35, and have recently issued a 12-point "checklist" to determine whether a business is genuinely independent.


    Nick O'Brien

    <mod note>
    Hi Nick,
    Please read the T&C of this board. Blatant advertising is not allowed. You can ask admin to change your login to Nick@myco.co.uk and promote your company whilst advising posters.

  9. #9

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    Quote Originally Posted by Kime OBrien View Post
    From what you say in you query, I suspect you might be subject to the IR35 rules. If that is so, then it will be of no benefit to employ your wife, as the allowable deductions under IR35 are fixed and very limited. [/url]
    Just out of curiosity, what factors in the OP points towards being subject to IR35?

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    Quote Originally Posted by Craig@InTouch View Post
    Just out of curiosity, what factors in the OP points towards being subject to IR35?
    WHS. Unless the OP has already been in touch with the said Accountant outside this forum, I wonder how the Accountant has come to the said conclusion.
    If your company is the best place to work in, for a mere 500 p/d, you can advertise here.

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