Pension contributions from employer
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  1. #11

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    Does she really do 11.5k's worth of work for the company? Would you pay someone else the same to do the same amount of work if your wife wasn't able to work? Would you really? Would you? Would you?
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    Quote Originally Posted by SueEllen View Post
    Do you pay at least NMW to all employees?

    Do you have a contract of employment?

    You are aware being an office holders of a company doesn't necessarily mean you are an employee, right?
    We receive a salary of 11,500/year. I'm not sure about the contract of employment - need to check with my accountant. Can office holders of the company receive employer pension contributions?

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    1. She doesn't need a written contract of employment. Though it might make it easier if challenged. The contract can be written or oral or implied.

    2. Anybody can receive pension contributions. You could make me a member of the pension scheme and make employer contributions on my behalf.

    The real questions are the tax treatment of these. In terms of mrs salary the question is whether it is a legitimate expense and chargeable to CT. If the work isnt an open market rate then possibly not. They may even in the worst case assess that salary to you. If mrs works 10 hours a week or so you are maybe alright. Depends how much risk tolerance you have.

    In terms of the pension the question is whether it is in the course of business. Again this determines whether it is a chargeable expense or not.

    What you are doing is very common. It is something hmrc take an interest in so you may need to defend your position.
    Last edited by ASB; 1st October 2017 at 21:17.

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    Quote Originally Posted by northernladuk View Post
    Does she really do 11.5k's worth of work for the company? Would you pay someone else the same to do the same amount of work if your wife wasn't able to work? Would you really? Would you? Would you?
    Would you expect someone to take on the risk and legal obligations of being a company director without some compensation for that? Would you really? Would you? Would you?
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    Quote Originally Posted by suresh505 View Post
    I think you have nailed it above - that's exactly my concern. I'm a consultant and my wife is a secretary in the company. We both receive a salary of 11,500/year. It appears like, even though we can draw equal amounts of dividend each year, it may not be appropriate to draw equal amount of employer pension contributions. This is because, the pension contribution from the employer should correspond to the work done by the employee. Let's say, the company has 50,000 to contribute towards pensions - can we split it as 35,000 for me and 15,000 for my wife?

    (P.S.: I will be talking to my accountant about this as well but I would like to know some real world experience from people in this forum)
    Since you are equal shareholders you MUST draw equal amounts of dividends each year (assuming you aren't using alphabet shares, or dividend waivers), so that becomes irrelevant.

    I would consider carefully what the company is paying for. In one case, you have someone who is a company director (considerable legal responsibility) plus is a fee earner who is bringing income into the company. In the other case, you have someone who is doing some productive work for the company without earning money, and is also a company director with the same considerable legal responsibilities that the other director(s) would have.

    So in terms of total remuneration, I would weigh up those factors and make sure that the total package is commensurate with the responsibilities that each person is taking on - the idea that anyone would take on the legal responsibility of a director of a for-profit entity without compensation (or at the very least their D&O cover paid for) is (IMHO) daft. Personally, I see nothing wrong with 35k-15k, but I'm not an accountant or an IFA.
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    Quote Originally Posted by TheFaQQer View Post
    Would you expect someone to take on the risk and legal obligations of being a company director without some compensation for that? Would you really? Would you? Would you?
    In the OPs case and in most others they don't have a clue what their obligations are. They've just been told what they max they can pay is and have gone with that.
    Last edited by northernladuk; 2nd October 2017 at 08:30.
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    Quote Originally Posted by northernladuk View Post
    Rubbish... In the OPs case and in most others they don't have a clue what their obligations are. They've just been told what they can pay and go with that.
    1) How do you know that? Where do you get the basis that "most others" don't have a clue what their obligations are?

    2) Even if you aren't aware of your legal obligations, that doesn't mean that they don't exist.

    3) Are you saying that you would expect someone to take on legal responsibilities of being a director and not be paid for that?

    4) If someone offered you a position of director of a limited (and for-profit) company, and expected you to take on the legal responsibilities, are you saying that you would do that without expecting to be paid?
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    Quote Originally Posted by TheFaQQer View Post
    Since you are equal shareholders you MUST draw equal amounts of dividends each year (assuming you aren't using alphabet shares, or dividend waivers), so that becomes irrelevant.

    I would consider carefully what the company is paying for. In one case, you have someone who is a company director (considerable legal responsibility) plus is a fee earner who is bringing income into the company. In the other case, you have someone who is doing some productive work for the company without earning money, and is also a company director with the same considerable legal responsibilities that the other director(s) would have.

    So in terms of total remuneration, I would weigh up those factors and make sure that the total package is commensurate with the responsibilities that each person is taking on - the idea that anyone would take on the legal responsibility of a director of a for-profit entity without compensation (or at the very least their D&O cover paid for) is (IMHO) daft. Personally, I see nothing wrong with 35k-15k, but I'm not an accountant or an IFA.

    Thanks. I will be talking to my accountant. I just wanted to make sure that I'm not way off the mark in my understanding.

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    As you are both director's then your company actually has no responsibility under auto enrolment and you can advise them of that fact on the pensions regulator website.

    It might be better for you to setup personal arrangements that the company then makes employer based contributions to. This would be easy to do and would allow you to control the contributions as well as the way that they are invested.

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    Quote Originally Posted by Patrick@Intouch View Post
    As you are both director's then your company actually has no responsibility under auto enrolment and you can advise them of that fact on the pensions regulator website.

    It might be better for you to setup personal arrangements that the company then makes employer based contributions to. This would be easy to do and would allow you to control the contributions as well as the way that they are invested.
    I think that is probably the best thing to do in my scenario. In the pension regulator's website, it only mentions the salary details (and age) to decide if auto enrollment is applicable or not. Can I assume that both the directors can be exempt from auto enrollment even if we receive a salary (11,500 each) ?

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