Paying divs to Company Secretary

[Langkawi]

Hi,

I am about to set up my limited and my mate has agreed to go Company Secretary (once we cleared up the matter of him not having to do my typing or wear a short skirt!).

I have agreed to pay him £1,000 a year and was planning to do it in divs to avoid any N.I. or Income tax liabilities. (I know I could get my accountant to go Comp Sec for less, but I owe my mate a few favours and its a two birds with one stone scenario.)

My questions are;

1. Am I correct that the divs route avoids any tax implications for him or my company?

2. Do I need to make him a shareholder to distribute divs to him or can I issue them to him just as Comp Sec?

3. Is there anyway for me to class this as an expense for the business, without incurring all the problems that viewing it as salary might incur? For instance could it be deemed a payment for 'consulations' without it becoming a taxable salary?

Many Thanks
Alan

[Cowboy Bob]

Divis are only paid to shareholders, and each share must be paid the same amount of dividend.

Besides, company secretary is not normally a remunerated position.

[Nixon Williams]

Hi,

I am about to set up my limited and my mate has agreed to go Company Secretary (once we cleared up the matter of him not having to do my typing or wear a short skirt!).

I have agreed to pay him £1,000 a year and was planning to do it in divs to avoid any N.I. or Income tax liabilities. (I know I could get my accountant to go Comp Sec for less, but I owe my mate a few favours and its a two birds with one stone scenario.)

My questions are;

1. Am I correct that the divs route avoids any tax implications for him or my company?

2. Do I need to make him a shareholder to distribute divs to him or can I issue them to him just as Comp Sec?

3. Is there anyway for me to class this as an expense for the business, without incurring all the problems that viewing it as salary might incur? For instance could it be deemed a payment for 'consulations' without it becoming a taxable salary?

Many Thanks
Alan

Not a recommended way!

1. Any dividends would be income for him and declarable on his tax return.

2. Only shareholders can receive dividends.

3. Any payment would be taxable whether as salary or fees.

I would urge you not to do what you are planning, it sounds like a recipe for disaster!!

Alan

[Langkawi]

Thanks folks.

Am glad I asked now, as its obviously more complicated than I thought.

Will proceed with my mate as Comp Sec but will forget the payment & divs idea.

Cheers,
Alan

[expat]

Thanks folks.

Am glad I asked now, as its obviously more complicated than I thought.

Will proceed with my mate as Comp Sec but will forget the payment & divs idea.

Cheers,
Alan

Sounds wiser.

Funny how some people seem to think that "dividend" = simply "method of paying income without having to pay NICs". And then protest that they are running a real business and not trying to evade tax!

[dotnetter]

I am kinda in the same situation here, need to talk to my accountant first but what do you guys think?

My girlfriend is the comp secretary but I dont think she holds any shares.

Anyway she is leaving her job and starting a new one, they have taken the amount she owes for her train season ticket from her final pay. She then has to wait a month before the rail company give her a refund.

I said id pay her this month and she can pay me back. I was going to pay her dividends from the company and get repaid when she gets a cheque.

Whats the best thing to do?

[Nixon Williams]

I am kinda in the same situation here, need to talk to my accountant first but what do you guys think?

My girlfriend is the comp secretary but I dont think she holds any shares.

Anyway she is leaving her job and starting a new one, they have taken the amount she owes for her train season ticket from her final pay. She then has to wait a month before the rail company give her a refund.

I said id pay her this month and she can pay me back. I was going to pay her dividends from the company and get repaid when she gets a cheque.

Whats the best thing to do?

You cannot pay her a dividend if she is not a shareholder.

I would suggest that you simply give her a loan from your personal funds and not involve your company at all.

Alan

[dotnetter]

You cannot pay her a dividend if she is not a shareholder.

I would suggest that you simply give her a loan from your personal funds and not involve your company at all.

Alan

Yeah I though that would be the case, but I would have to pay myself dividends to be able to loan her, then do I just put the money back into the company?

[expat]

Yeah I though that would be the case, but I would have to pay myself dividends to be able to loan her, then do I just put the money back into the company?

Aargh! "not involve the company at all".

You personally just lend her the money.

If you don't have it to lend, but your company is in a position to pay you some more income, they you could have your company do that. Of course you pay tax on your income from the company.

End of story.

Why should you think it's ok for your company to go round lending money?

[dotnetter]

Your not getting it, I personally dont have the money, and yes I can pay myself from the company and give it to her, but how would I pay it back to the company.

Or are you saying I just simply can't use the money in the company?

Basically the problem is paying the company back.