Income splitting with spouse as Director

[parklife]

Hello everyone, been through the forums but not finding much on the scenario I'm looking into.

Want to setup a Limited Company and split shares 50/50 with my wife. As she doesn't work and to make use of her allowance I want to make her a Director and pay us both a nominal salary (£8k each). The shares would be ordinary shares and gifted to her and we would take all Dividends out of the company.

I'm aware of the Section 660 rules and the Arctic Systems ruling so know the consequences if caught, and can't prove she's doing £8k's worth of work.

Is anyone else doing this, it's not easy to find case examples where both contractor and spouse are directors with salaries and taking everything out in dividends?

[cojak]

You mean the £2000 of dividends not taxed and the rest taxed?

[kaiser78]

Hello everyone, been through the forums but not finding much on the scenario I'm looking into.

Want to setup a Limited Company and split shares 50/50 with my wife. As she doesn't work and to make use of her allowance I want to make her a Director and pay us both a nominal salary (£8k each). The shares would be ordinary shares and gifted to her and we would take all Dividends out of the company.

I'm aware of the Section 660 rules and the Arctic Systems ruling so know the consequences if caught, and can't prove she's doing £8k's worth of work.

Is anyone else doing this, it's not easy to find case examples where both contractor and spouse are directors with salaries and taking everything out in dividends?

Is that because she actually won't be and you are in fact referring to income shifting as opposed to income splitting as per your title ?
Just make sure if that she has to justify her involvement in the company that she can in some way or another.

[JB3000]

Hello everyone, been through the forums but not finding much on the scenario I'm looking into.

Want to setup a Limited Company and split shares 50/50 with my wife. As she doesn't work and to make use of her allowance I want to make her a Director and pay us both a nominal salary (£8k each). The shares would be ordinary shares and gifted to her and we would take all Dividends out of the company.

I'm aware of the Section 660 rules and the Arctic Systems ruling so know the consequences if caught, and can't prove she's doing £8k's worth of work.

Is anyone else doing this, it's not easy to find case examples where both contractor and spouse are directors with salaries and taking everything out in dividends?

You don't appear to be familiar with the Artic Systems case. If you were you would know that it is virtually identical to what you have described (apart from your wife being a director which would be a positive rather than a negative, and therefore strengthen your case for the gift).

You could probably justify paying her a salary based on her duties and responsibilities that she is taking on as company director.

[northernladuk]

Hello everyone, been through the forums but not finding much on the scenario I'm looking into.

Can't have looked very far. We've gone through this countless times.

[TheCyclingProgrammer]

Whether or not a nominal (sub £10k) salary for a director who doesn’t do much else than carry the legal responsibility of being a director can be justified is a matter for debate, some people think it’s fine, some don’t. You don’t have to pay her a salary.

No involvement in the business needs to be justified for being a shareholder. You just need to make sure they are ordinary shares with full capital rights on winding up.

[malvolio]

Whether or not a nominal (sub £10k) salary for a director who doesn’t do much else than carry the legal responsibility of being a director can be justified is a matter for debate, some people think it’s fine, some don’t. You don’t have to pay her a salary.

No involvement in the business needs to be justified for being a shareholder. You just need to make sure they are ordinary shares with full capital rights on winding up.

No it doesn't. Arctic says that splitting the income from a married couple's business to utilise both tax allowances is perfectly acceptable and reasonable. Agree about them being shares with equal rights.

[jamesbrown]

No it doesn't. Arctic says that splitting the income from a married couple's business to utilise both tax allowances is perfectly acceptable and reasonable. Agree about them being shares with equal rights.

I think you misread, but it was expressed slightly oddly.

[malvolio]

I think you misread, but it was expressed slightly oddly.

Ermm, yes, looking at it again. I think we're actually in violent agreement!

[TheCyclingProgrammer]

Ermm, yes, looking at it again. I think we're actually in violent agreement!

Maybe didn’t word it well, so to put it another way, so long as the shares are more than just a right to income, the spouse doesn’t need to do anything to justify their shareholding and any subsequent dividends. You just need to stick with the precedents set by the Arctic case to stay on the safe side.