Adding house wife as a ltd company director

[JohntheBike]

Anyway, why faff around with that approach - if you're both shareholders you'll be entitled to a capital distribution when the company is wound up. Take dividends to use up your basic rate band and the dividend allowance, then take the rest as capital distribution to make use of your CGT tax free band and pay tax on the rest at a fairly low 10% if you qualify for ER.

I think the crucial factor may be that my wife and I have always been paid in line with the minimum wage requirements, certainly for some time since this requirement has been brought in. I pay myself the minimum hourly rate for 40 hours and my wife for 25 hours, the rest in dividends. The article implies that contractors who tend to pay minimum salaries, not in line with minimum wage requirements, would invalidate any claim for redundancy.

I guess some bluff with HMRC might be in order, i.e. if they don't agree to redundancy payments, the case could be put before the 1st tier tribunal. I would certainly consider this approach, as legal opinion can be wrong and courts can judge otherwise. I guess they wouldn't want to risk a judgement against them, unless they already have case law in their favour, so might agree an amicable solution. However, that remains to be seen and the merits of each case would have to be considered. So, a client not renewing a contract and the main fee earner not being able to find any new engagements, for whatever reason, thus putting the company into liquidation, might have some influence on the situation.

So this article might only be an opinion, and I've had occasion to disregard legal opinion to my ultimate benefit, i.e. the "system" must be challenged. I've just had judgement in the County Court against an agent of HMRC, who couldn't be sued, but their agent could be. Anyway, I would hope that my accountants would advise the best course of action and another method of extracting the funds might be more suitable. But the message is, don't accept that something can't be done, unless you challenge it.

[Lance]

don't accept that something can't be done, unless you challenge it.

said a wise man.

[JohntheBike]

said a wise man.

and there is also the possibility that I, as an employee of MyCo could sue MyCo in the ET, for redundancy payment that HMRC refused to sanction, which would thus be outside the control of HMRC, i.e. not in the 1st Tier Tribunal. I have sufficient experience of representing myself at Appeal Court level to present a valid case, thus incurring minimum costs.

Clearly I'd have to weigh up the costs v's the possible returns, and decide my course of action. When handling a past investigation by HMRC, the inspector was at pains to point out that MyCo and me are two separate legal entities and as such treated us so during the investigation. So the concept of my suing MyCo should not be legally prevented.

However, as another commentator has put it here, why bother with this approach, if there is another sounder method of extracting the funds. I'll have to wait and see, as there are too many variables at the moment to have a clear picture of what path to take.

[TechRiskPartners]

if your company hasn't started earning any money yet it's probably worth closing it and opening company2 (with the advice of an accountant)

Spoke to accountant. He said to change the Director from both to only myself. She earning more than £50K is not gonna help either. So I am planning to start solo. He said we can remove wife as Director for the existing Ltd company. Hopefully that can be done.


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[Lance]

Spoke to accountant. He said to change the Director from both to only myself. She earning more than £50K is not gonna help either. So I am planning to start solo. He said we can remove wife as Director for the existing Ltd company. Hopefully that can be done.


Sent from my iPad using Contractor UK Forum

I don’t rate your accountant much.
Removing her shareholding makes sense, but not her directorship.

What happens if you die? Who runs the company? Having the wife a director, immaterial of shareholding, has benefits above and beyond tax.

[TechRiskPartners]

Wrong Selection of Words

I don’t rate your accountant much.
Removing her shareholding makes sense, but not her directorship.

What happens if you die? Who runs the company? Having the wife a director, immaterial of shareholding, has benefits above and beyond tax.

Apologies, you are right, I have selected wrong words. We are still exploring to make sure we three (me, wife and accountant ) are crystal clear about this.

Thanks

[Craig@Clarity]

Hi

I am starting a small company and set up the company as 50-50 between myself and my full time working wife (salary £57.5K) from 1 July 2019. I made her Director and the plan is to pay her dividend and may be some salary if she finally manages to help me (like she is doing now - managing admin work, website development and review, tools development and testing, pipeline management, diary management, etc).

Is there anything wrong in the thinking to pay her 50% dividend finally on top of her full time salary? would that be too much tax on her and if it is easier not to include her or partially include her?

Sounds like you've already set up the company and made her 50% shareholder. There is absolutely nothing wrong with that and nothing wrong with paying her 50% dividends on top of her full time salary. In terms of whether it would be too much tax on her, that is down to perception and what you consider too much.

The facts are that you'll both get a dividend allowance of £2k where you don't pay any tax on it. The remaining dividend your wife receives will be taxed at 32.5% since she's already a higher rate tax payer. That rate will apply up to £150k income at which point it'll be taxed at 38.1%. She'll also start losing her personal allowance over £100k gross income.

If you're looking to be the most tax efficient route and paying as little additional personal tax as possible, then you're probably better off not including her in the company at all assuming she's content in her full time role.

[RobScott]

even if it is Inside IR35?

Sounds like you've already set up the company and made her 50% shareholder. There is absolutely nothing wrong with that and nothing wrong with paying her 50% dividends on top of her full time salary. In terms of whether it would be too much tax on her, that is down to perception and what you consider too much.

The facts are that you'll both get a dividend allowance of £2k where you don't pay any tax on it. The remaining dividend your wife receives will be taxed at 32.5% since she's already a higher rate tax payer. That rate will apply up to £150k income at which point it'll be taxed at 38.1%. She'll also start losing her personal allowance over £100k gross income.

If you're looking to be the most tax efficient route and paying as little additional personal tax as possible, then you're probably better off not including her in the company at all assuming she's content in her full time role.

Hi,
can we still make spouse as director even if you fall INSIDE IR35! ... all likely in 2020 due to off-payroll !

is it worth then?

[northernladuk]

Hi,
can we still make spouse as director even if you fall INSIDE IR35! ... all likely in 2020 due to off-payroll !

is it worth then?

[Lance]

Hi,
can we still make spouse as director even if you fall INSIDE IR35! ... all likely in 2020 due to off-payroll !

Yes.

is it worth then?

It depends. Probably not though.