Pay director/shareholder wife pension in lieu of a salary?

**northernladuk** · 9 July 2016, 15:32

1) Get an accountant and ask them the best way to set you up. If you get it wrong it will cost you a hell of a lot more that the first months payment for your accountant
2) Sack the wife. If she's a qualified accountant she should know this and if not be able to find out.

You don't need an opinion, you need specific advice from a professional. The first month will cost less than 100 quid which is cheap as chips compared to what it could cost you getting it wrong.

**SueEllen** · 9 July 2016, 17:02

Your wife is an accountant and cannot look this up or find out?

She is more qualified than the contractors on this board who answer questions from their own experience.

If she can't look up or find out this information including from her friends', colleagues and acquaintances who work in accountancy then I think you need someone else to do your pay roll, end of year accounts etc. otherwise you will end up in a hell of a mess.

BTW I'm speaking as someone who has got help from her accountancy relations and friends including one who is a contractor though none of them do my accounts in any shape or form.

**Cirrus** · 9 July 2016, 18:25

Your company can pay pension up to the £40k limit for you. You don't need a salary to back that up. For your wife, it is more tricky. I think you could pay her some pension but seek guidance on how much the Revenue might find reasonable.

**AndyT** · 9 July 2016, 18:30

Thanks both for replying. Always nice to see a forum that makes new posters feel welcome.

To be very clear we are looking for a contractor specific accountant now, but we are at a very early stage (I don't even have a contract as yet) and as much as anything looking for an understanding of what contractors do and therefore what questions we need to ask prospective accountants. If pensions are likely to be part of the solution for us then we will need a contractor accountant that has experience of that. If not then it's irrelevant, some of the contractor accountants websites don't even mention pensions.

My wife is highly skilled in specialist accounting (charities as it happens). She's more than capable of handling bookkeeping and payroll but she isn't going to be able to advise on fairly detailed contractor tax planning (alternate approaches to IR35). What you are both saying is, if we translate it into the IT world is...

"Why can't your mate that does Windows Server support help you with your AS400 problem? He can't be very good at IT."

It's not the same thing.

The irony is you guys would also give me a hard time if I said I was going to my mate down the road who was a general company/non-contractor specific accountant and getting him to advise me. But the moment I mention my wife is an accountant you are saying "Well, why can't she do it all? She must be rubbish."

My reason for posting was to see if anyone out there was working in the way I was enquiring about. I'm not going to base my company's tax planning on it but it might inform us on what is possible, it might lead people to recommend specific accountants etc.

**AndyT** · 9 July 2016, 18:34

Originally posted by Cirrus View Post

Your company can pay pension up to the £40k limit for you. You don't need a salary to back that up. For your wife, it is more tricky. I think you could pay her some pension but seek guidance on how much the Revenue might find reasonable.

Thanks very much Cirrus.

As I understand it from what I've read so far, her remuneration would certainly be limited to what "market rate" is for what she was doing for the company at that point. I'm just not sure if that can be solely pension contributions or if she would need to be paid a token salary as well (which would attract full tax of course).

**Scruff** · 9 July 2016, 22:03

Is she a bookkeeper or Accountant?

**AndyT** · 9 July 2016, 23:03

She is an accountant who is a Fellow Member of the AAT (one of the first in fact) and ACIE qualified to carry out Independent Examinations of Charity Accounts in the UK (up £1m turnover from memory).

Why do you ask? I'm not sure what bearing any that has on whether our company can pay her a pension in lieu of a salary for her doing some bookkeeping and business admin?

There seems to be some confusion over terminology here.

Bookkeeping is documenting the income and expenditure of a company in a standard format that an accountant can produce accounts and advice from, it is not the same as quarterly/year end accounts where you make decisions on tax treatment etc. If we end up going with Free Agent or something then it becomes just the admin of that system. You guys do that, don't you?

Payroll is just the admin task of paying and taxing someone an agreed amount and filing the RTI with HMRC, it is not the same as setting salary level or tax planning. Again if we go with Free Agent it can be delivered by anyone through that as I understand it.

She can obviously do those bits and chasing debt, business admin etc. with her eyes closed, but that's not the same as living and breathing the world of (for example) contractor tax planning, IR35 strategies etc. That's outside the scope of what she does (see my AS400/Windows comment above) and so that's not what we'd use her for.

I wouldn't use a contractor specific accountant to prepare a set of accounts for a £1m charity or independently examine them to meet the Charity Commission's requirements. And I wouldn't expect them to be able to "find out from their friends". They are each specialists in their own area.

Sorry if I seem defensive, maybe that isn't where you were going with your question but I really didn't think my first post and a question about pension contributions for directors would lead to my wife's ability as a specialist accountant being called in to question as it has been here, when I made it quite clear that we are not planning on using her as an accountant. My wife worked bloody hard, training for years while we had a young family to get where she is now in her field and is incredibly respected for what she does for clients all over the country.

I use a lot of forums and lurked for weeks here before posting and have been amazed at the tone of some of the replies that get posted to simple questions. This surely should be a forum for helping each other out? God knows there's enough to deal with already as a contractor these days. If people can't constructively and positively reply to a newbie maybe give it a miss and concentrate on the more social parts of the forum?

Some of these replies could have simply said...

"I don't personally know the answer to this, it's probably best to raise your ideas with an accountant when you're shopping around to check they have experience in this area. The sooner you get one the better. The fact your wife is an accountant is cool, make sure, though, she understands what the contractor accountant needs from her in terms of bookkeeping."

That's what I would have written, it says the same thing but without the nastiness. I get the impression some posters here use newbies on the forum as a way of "kicking the cat" and letting off a bit of steam after a bad day.

**SueEllen** · 10 July 2016, 07:52

@AndyT the reason you are getting a poor response is because it should be your wife not you seeking out responses to your questions through other accountants.

If she can't then you both need to pay for advice that is specific to your circumstances from the relevant professional.

Some of the contractor accountants who look on here refuse to take on clients where they don't do everything for apart from the bookkeeping.

In regards to IR35 while it is a tax law, you need to look at your contracts from a business-to-business contract law perspective.

So you can either get a lawyer to review your contracts for all business terms and make sure the contract is entirely a business-to-business one ensuring they are aware of IR35, or you can consult an IR35 specialist who will concentrate on the clauses that relate to IR35. Accountants while they deal with some tax law are not legal specialists and as you pointed out your wife can't do your end of year then don't expect other accountants to be lawyers.

**SueEllen** · 10 July 2016, 07:54

Oh and our bookkeeping even if you have 3-4 clients is generally a piece of p*ss as you don't have tonnes of entries to keep on top of day in day out.

Pay director/shareholder wife pension in lieu of a salary?