wife as a shareholder

[jamespe]

Hello,

I have read many threads trying to understand how to set my wife as a Shareholder in my company and i haven't been able to reach a conclusion. from my research I see two possible options:
a) It should've been done when the company was setup and the shares were worth nothing.
b) you can because is your wife and due to previous Judges decisions such as in Artic system

I setup my company 5 years ago and it is been running successfully and I got some capital to distribute as bonuses. can I set my wife as a Shareholder without breaking the law? Is it right to pay her bonuses straight away?

thanks very much before hand

[NotAllThere]

Do you understand the difference between a bonus and a dividend?

[northernladuk]

Bearing in mind it's discussed at great length on here almost monthly how on earth can you not know yet?
I presume looking at your lack of understanding of bonuses and dividends you have an accountant so why not get him to advise you instead of a free internet forum?

[administrator]

Speak to your accountant would be my advice. If done wrong can be a pain in the arse. Not sure about being able to award the dividend straight away but think you can as long as it falls in the right tax year. Shares can attract tax so needs to be done right.

Look at different classes of shares too. You can give a different class of shares to your wife which would allow you to vote different levels of dividends for each of you and would also minimise the risk to the business if the relationship breaks down, e.g. create 100 class B shares and allocate 2 of them to your wife to allow variable dividends to be awarded to her.

Really would speak to a professional about this one though.

[northernladuk]

Ouch...not wanting to contradict our glorious leader but... Stay away from class B shares...

[TheFaQQer]

Ouch...not wanting to contradict our glorious leader but... Stay away from class B shares...

I was having a discussion with someone last week about this idea - and one of the expert accountancy practices was pointing out that if you had a class B share for your spouse you could pay them a dividend of £5k every year without paying any tax (assuming they don't have any other dividend income) regardless of whether they are a higher rate tax payer or not.

I'd want someone to have my back in case of an investigation, but I'm not sure that it's a bad idea.

[northernladuk]

I was having a discussion with someone last week about this idea - and one of the expert accountancy practices was pointing out that if you had a class B share for your spouse you could pay them a dividend of £5k every year without paying any tax (assuming they don't have any other dividend income) regardless of whether they are a higher rate tax payer or not.

I'd want someone to have my back in case of an investigation, but I'm not sure that it's a bad idea.

Indeed but that B class share allows you to manipulate the dividend payment to maximise the tax situation to the penny with no relation to the income of the company or shares of the husband. I was under the impression this is one step too far for HMRC and has a similar effect to dividend waivers so attract unwanted attention. It can be done but a split of class A shares is the much safer option.

I also thought there was some issue about voting rights with different classes of shares and brings in to question this point...

Although this exemption was clarified in the Arctic Systems ruling, there are conditions:
◦The shares must be ordinary shares with full voting and capital distribution rights and the spouse or civil partner must play an active role as a shareholder in the business

[TheCyclingProgrammer]

You can have different classes of ordinary shares but they must rank "pari passu".

As above though, speak to your accountant.

[WordIsBond]

Different classes of shares is entirely legal. It also increases the risk of an HMRC investigation, and if the reason for it is only tax and there is no business reason, it could mean trouble.

There can be legitimate business reasons to have more than one class of shares, or have shares with different rights or restrictions. For instance, an employee-owned business can have redeemable shares which can be bought back when an employee leaves so they can be given to new employees. Or a company founder can have one class of shares to enable him to retain control while giving another class of shares to employees as a profit-sharing / incentive program.

Few of the business reasons for multiple classes apply to a typical one-man band.

OP should definitely get advice from a reputable accountant.

[northernladuk]

Different classes of shares is entirely legal. It also increases the risk of an HMRC investigation, and if the reason for it is only tax and there is no business reason, it could mean trouble.

There can be legitimate business reasons to have more than one class of shares, or have shares with different rights or restrictions. For instance, an employee-owned business can have redeemable shares which can be bought back when an employee leaves so they can be given to new employees. Or a company founder can have one class of shares to enable him to retain control while giving another class of shares to employees as a profit-sharing / incentive program.

Few of the business reasons for multiple classes apply to a typical one-man band.

OP should definitely get advice from a reputable accountant.

But neither of those examples are a one man band as they have employees??