New Accountant - advises against income splitting

[drumtochty]

Not to mention not getting a years state pension NI contribution.

[yMyjgT]

If she is also a director with no employment contract, there will be no need to justify the level of her salary.

For those that have spouses in the company with a salary, what reasons are there for not also making them a director then, if it avoids the worries around appropriate salary levels?

[abu1]

my accountant has also advised against it he also has advised against giving out dividends saying its risky and safer just to pay the tax on profits after the whole year. Told me apart from the salary leave all income in the account

[craigy1874]

If she is also a director with no employment contract, there will be no need to justify the level of her salary. If she is not, then the salary she receives will just need to be justified at a level appropriate for the amount of work she does for the company and at a market rate.

Eh? Don't have to justify the salary? I think you have got that one worryingly wrong.

I agree being a director makes it easier to justify a higher salary, but to say you don't have to justify it is just plain wrong.

If you are right then why not make all the children directors and pay them £8k each.

Think you need to re-think this one...

[craigy1874]

my accountant has also advised against it he also has advised against giving out dividends saying its risky and safer just to pay the tax on profits after the whole year. Told me apart from the salary leave all income in the account

wow, some seriously dodgy advice being passed around just now

[abu1]

wow, some seriously dodgy advice being passed around just now

dodgy of safe?

[LondonManc]

They basically said that they advise not to do this. She has no other earnings and I was paying minimum earnings to be tax efficient

Make her company secretary, get her to clean your home office once a week, set her up with a company email address and to be first point of contact for the accountant, train her up on FreeAgent and get her to process expenses. She's now doing enough to justify income splitting if Hector come calling.

[jmann]

https://forbeswatson.co.uk/profit-ex...use-tax-abuse/

According to this article, instead of salary, you can pay your spouse directors’ fees. You will need to appoint your wife as a director. This would be the best option for you.

[WordIsBond]

Eh? Don't have to justify the salary? I think you have got that one worryingly wrong.

I agree being a director makes it easier to justify a higher salary, but to say you don't have to justify it is just plain wrong.

Ever hear of HMRC challenging director's remuneration of £8K or even £11K?

They'd have to quantify the proper amount of compensation to compensate a director for the liability they incur by serving in that role. How can they prove it should be less than £11K?

If you pay a spouse director's compensation of £50K or £100K you might have an issue, but then IT, ERNI, and EENI come into play, so no one would do that and they wouldn't be likely to object.

If you are right then why not make all the children directors and pay them £8k each.

No reason, really, other than that it is illegal.

[WordIsBond]

https://forbeswatson.co.uk/profit-ex...use-tax-abuse/

According to this article, instead of salary, you can pay your spouse directors’ fees. You will need to appoint your wife as a director. This MIGHT be the best option for you.

FTFY. In most cases it is a good option. It's what I've done.