Best Tax Efficient Way To Stay Under The Higher Tax Band In 2016/2017

[psychocandy]

It's just PC's highly 'professional' terminology. I'm surprised he didn't call someone a knobhead at the same time.

I can if you want... :-)

[TheFaQQer]

And if someone's wife is doing nothing (or spending an hour a month filing stuff for a one man band), an £8K salary isn't ethical, whether you can get away with it legally or not. So I actually agree with you, mostly.

Being a director or company secretary has certain significant legal responsibility, and there is nothing wrong with being compensated for taking on those legal responsibilities.

[TheFaQQer]

Same with me but does she get a salary?

No. She gets a stipend paid via payroll.

[psychocandy]

Because there are rules about how the shares are given and the wife has to do something to earn the wage. You cant pay her when she does f all.. And 8k for filing receipts won't wash.

Just to state you have to do it without an explanation or highlighting risks etc is very poor advice.

NLUK is right. Also I understand changing the share allocation just to save tax is not considered cool. Advice I've always had was set it then leave it - the company structure is the company structure it should not be constantly amended to save tax.

[psychocandy]

So assuming the £8060 salary option to avoid the "fudged legislation", what will that cost the company? Wondering if anyone has the number to hand before I pull out a spreadsheet.

£237 according to that article.

[SimonMac]

Right so a summary of this (in my guesstimate)

EA is only allowed with two salaried people (not just Husband and Wife), can both be directors, but both people need to be able to justify their salary.

a 50/50 equity split between Husband and Wife is fair game, sharing of assets etc.

If the decision on EA goes south, the optimal salary is £8060 (ignoring the extra £52 where you pay less NI than Corp tax), if not the optimal salary is £11,000 but you would find it hard to justify paying someone £11k for office admin probably won't cut it.

I suppose that begs the question, what would be an appropriate salary for office admin?

Going on an average PA rate of £10 an hour, 1 day a week would be £4-5k a year?

[pr1]

Right so a summary of this (in my guesstimate)

EA is only allowed with two salaried people (not just Husband and Wife), can both be directors, but both people need to be able to justify their salary.

a 50/50 equity split between Husband and Wife is fair game, sharing of assets etc.

If the decision on EA goes south, the optimal salary is £8060 (ignoring the extra £52 where you pay less NI than Corp tax), if not the optimal salary is £11,000 but you would find it hard to justify paying someone £11k for office admin probably won't cut it.

I suppose that begs the question, what would be an appropriate salary for office admin?

Going on an average PA rate of £10 an hour, 1 day a week would be £4-5k a year?

But you might want to pay them a bit over the average so they're not tempted to jump ship and leave you in the lurch trying to recruit a new one

[WordIsBond]

Even that article admits its a grey area.

Seems there are three possilities to me:-

1. Single director - not allowed.
2. Husb/Wife director but only one gets salary - ?
3. Husb/wife director but both get salary - ?

I think this article seems to imply that there need to more than one director getting paid a salary. Of course, bearing in mind the need to be a bit careful of ensuring you dont take the piss with the salary this is easy enough I guess.

But, ultimately, worth the risk for £237 a year?

I'll try to keep this simple.

The Chancer announced that EA would be withdrawn for companies with only one employee who is also the sole director. The December Employer Bulletin says this:

Exclusion of Single-Director Companies from the National Insurance Contributions (NICs) ‘Employment Allowance’

From 6 April 2016, if you’re the only employee in a company, and also the director,
your company will no longer be eligible for the NICs Employment Allowance.

HMRC is currently consulting on the draft legislation for this change. The consultation
is open until 3 January 2016. To find out more and see how to contribute take a look
at the consultation document.

The consultation has NOT reported back, even though it closed 3 January. As of right now, the announcement is that the new rule excludes "single-director companies" where the director is "the only employee in a company." That means if you have another person that is either an employee or a director you would be eligible.

If the result of the consultation changes that to be more restrictive, then Employment Allowance may not be permitted under your cases 2 and 3, but there is no question about it right now. With what has been announced, in both of your cases 2 and 3 you do not have a "single-director company" and so you would remain eligible.

Thus, your closing question about is it worth the risk is meaningless. There is no risk because the exact rules haven't been announced, and because HMRC apparently are going to take the novel approach of actually announcing the rules before the tax year starts. There would only be risk if you had to make a decision now.

They may leave it at one director and not tighten it any further. As you've said, it is only £237. People are unlikely to make a second party a director for that amount unless there are other reasons to do so. To turn the question back the other way, if it didn't make sense to make your spouse a director before, is it worth it to do it now to gain £237? I'd say no. And if they restrict spouses, then they have to restrict partners, and then I suppose brothers and friends down the street. Why should things be more restrictive for a guy's wife than they would be for his friend? This is one that is going to be hard to tighten up equitably. So they may just say they want to encourage spouses to take part in their husband's business to increase gender income equality, so they are leaving it intact. That way, they can come up with a politically correct way to say, "This is a little hard to exclude husband/wife companies, so we gave up."

[WordIsBond]

That is £237 quid in your pocket rather than feeding/housing the poor, I know what most contractors will do.

I spent a lot more than that helping someone in trouble last year without the government's help, without paying some social worker's salary.

[WordIsBond]

Being a director or company secretary has certain significant legal responsibility, and there is nothing wrong with being compensated for taking on those legal responsibilities.

Agreed, I've argued the same. With most one man band contractor companies, it might not be worth £8K, but it is certainly worth something. If a spouse is a director and has any kind of involvement in the company, it would be very hard for HMRC to argue against a salary/stipend for her.