Using my wife's contracting company

[rlpb13]

Hi everyone!

My wife has been contracting for about 5 years now through her own limited company. I've helped her out with the admin, but the whole thing is in her name and she's the only person to ever take salary or dividends from the company. At this point it's all but dormant as the IR35 thing means she hasn't worked since last year.

I may have a potential small business contracting opportunity and I wondered what the situation would be with me using her company for it. Can she just employ me and pay me a salary? For me to take a dividend she'd presumably have to give me some shares. Is it ok for her to be taking a dividend from the company where the income was generated by my work? Any other implications, like needing different indemnity insurance to cover extra employees?

Any thoughts on any of the above would be very gratefully received. Thanks!

[Paralytic]

<nluk mode activated>

What does your accountant say?

</nluk mode>


More helpful answer: in theory yes, this should be possible but some agents/clients might have an issue with you not being a director or 50% owner in the Ltd company. Have you asked them about that?

Is your wife's company SIC code correct for the work being done?

It is fine for dividends to be shared between two people when only one is providing the revenue at any one point in time. Gifting shares should be possible, but if her company has significant funds, check whether this is strictly allowed.

You'll have to check the existing insurances, to see whether they would need updated.

However, unless its is completely not economically viable, or time is of the essence, I'd recommend just setting up your own ltd company - it can be done quickly.

But, speak to your (or your wife's) accountant too.

[ladymuck]

Depending on the value of the contract and how long it is likely to last, you could consider an umbrella too?

[northernladuk]

Deffo get her to speak to her accountant. Might be better options depending on the values you are talking about.

[Craig@Clarity]

It is fine for dividends to be shared between two people when only one is providing the revenue at any one point in time. Gifting shares should be possible, but if her company has significant funds, check whether this is strictly allowed.

I would advise that there are certain risks to income shifting doing this. Whole can of worms.

As other's have said, depends on contract length and value. Depending on your IR35 status, I'd say go brolly or start a new company and perhaps have your wife as a shareholder on there too depending on her personal income and tax position.

[mikedarv]

Potentially in the same boat here soon. My Ltd was MVL'd in May, I have been Umbrella since then but got terminated early due to covid.

I have seen various outside IR35 roles recently so might be looking to use my wife's Ltd. Money wise absolutely no issue with it going into her account/dividend pot, basic salary to me is more than fine.

Waiting to hear back from the accountant as I'm not sure if it's worth signing up as a director or just as an employee?

[malvolio]

You can share dividends without problems, so work out a shareholding , buy the shares off the company and update Companies House. If you want a salary, probably best to be a director, which is more flexible than being an employee and avoids stuff like NMW and pensions.

Don't let the accountant scare you over income shifting, it is not an issue.

[northernladuk]

Potentially in the same boat here soon. My Ltd was MVL'd in May, I have been Umbrella since then but got terminated early due to covid.

I have seen various outside IR35 roles recently so might be looking to use my wife's Ltd. Money wise absolutely no issue with it going into her account/dividend pot, basic salary to me is more than fine.

Waiting to hear back from the accountant as I'm not sure if it's worth signing up as a director or just as an employee?

But if goes in to her pot and she just takes over the spending it can be argued it still comes back to you so that is a very tenuous argument.

I see what Mal says but I can't see how this will pass any kind of investigation. You shut company, get tax advantage, contract through wifes company, she takes money and you continue to live same lifestyle.

Too easy and clearly avoids what the legislation attempts to fix.

[wattaj]

You can share dividends without problems, so work out a shareholding , buy the shares off the company and update Companies House. If you want a salary, probably best to be a director, which is more flexible than being an employee and avoids stuff like NMW and pensions.

Don't let the accountant scare you over income shifting, it is not an issue.

I think that this is an oversimplification: you don't seem to consider the risk arising from the MVL of the earlier company. AIUI, this effectively bars one from being a beneficial owner in the same line of work as the earlier company.

Happy to be proved wrong of course.

[malvolio]

I don't recall anything in the Arctic ruling that says man and wife cannot share in the proceeds of their joint limited company, especially if the shares are purchased rather than gifted (although that is a minor point anyway). It's not like the situation has arisen as a result of any kind of planned action, more a combination of circumstances and is defensible if it were challenged on that basis.

Or, as the OP suggested, take a minimum salary as an employee and no shares or dividends. Not tax efficient, but let's make sure the tax tail is wagging the business dog. Then again, if the OP was not concerned about tax efficiency, he wouldn't be chasing outside IR35 work in the first place.

However if it is at all a concern, then simply start a new company in isolation, stay working through an umbrella, or go permanent.