Spouse (and employee) pension contributions from Ltd?

[Gomez]

Greetings. Long time member of the forums but first post in years. Good to be back :-)

I (like many others I guess) employ my wife in my Ltd and she is a 50% shareholder. Whilst she doesn't earn fees, she does lots of other things that help run the business and get me work/manage work. She is paid around 11k odd a year. If the company wished to make pension contributions for her, what is best way to go about it and what are the rules around this? I already have a SIPP but she doesn't have one. I am expecting comments that probably point out the risks i.e. what if we split up etc etc but lets just assume that is not going to happen and isn't an issue.... :-) I think I read somewhere about the HMRC 'wholly and exclusively' rule but haven't delved down into that just yet.

TIA

[northernladuk]

I (like many others I guess) employ my wife

Do you really?. Do you have a contract of employment?

in my Ltd and she is a 50% shareholder. Whilst she doesn't earn fees, she does lots of other things that help run the business and get me work/manage work.

Who are you trying to kid. You are right, many others do this but their wives don't lift a finger either. At least call a spade a spade when discussing with your peers

She is paid around 11k odd a year. If the company wished to make pension contributions for her, what is best way to go about it and what are the rules around this? I already have a SIPP but she doesn't have one. I am expecting comments that probably point out the risks i.e. what if we split up etc etc but lets just assume that is not going to happen and isn't an issue.... :-) I think I read somewhere about the HMRC 'wholly and exclusively' rule but haven't delved down into that just yet.
TIA

Firstly your accountant is your best bet so you should be asking them
Secondly this has been asked quite a few times on the forums. If you type Spouse pension site:forums.contractoruk.com you'll find a couple of threads. Play about with the keywords. This one answers your question though
https://forums.contractoruk.com/acco...-for-wife.html

So IMO, the answer is even a small contribution will be difficult to justify if caught but a couple of K isn't going to get picked up. Anything above that is a piss take and a no no. But you can do you what, it's whether you'll get away with it when you get caught.

[Gomez]

Good advice. Thanks. What we are talking about here is small pension payments (if any at all), not taking the piss or anything. Will speak to my accountant as suggested (which I realise should have done first anyway).

[northernladuk]

Good advice. Thanks. What we are talking about here is small pension payments (if any at all), not taking the piss or anything. Will speak to my accountant as suggested (which I realise should have done first anyway).

Be interesting to see what they say. From what we've seen and who I've spoken to many of them say not to bother to be on the safe side, some may say minimum but I'm sure you'll be able to find a slapdash set up that says yeah fill your boots. Mine said it's technically possible but sucked their teeth at it which is was enough for me to not do it if I was in a position to do so.

I am sure they'll know but make sure they clarrify the point about being an employee or not.

[Protagoras]

I'd be interested, out of idle curiosity, to know what rules this might breach (employee and spouse).

Is this a 'settlement' thing, for example?

[northernladuk]

I'd be interested, out of idle curiosity, to know what rules this might breach (employee and spouse).

Is this a 'settlement' thing, for example?

To be honest it doesn't seem to breach if done properly and to equivalent levels of a normal perm on that wage but I would have thought large pension offerings would come under GAAR as aggresive avoidance wouldn't it?

[WTFH]

To be honest it doesn't seem to breach if done properly and to equivalent levels of a normal perm on that wage but I would have thought large pension offerings would come under GAAR as aggresive avoidance wouldn't it?

I would suspect that if someone were to pay their spouse/family member/friend a minimum wage for alleged work, but also max out their dividends and pension, that it would be seen as pushing it a bit.

We used to have a member on here who boasted about working less than 5 days a month (same client for 15+ years), but employed his wife full time to do his paperwork because he was too busy.
It's that kind of thing that give proper contractors a bad reputation, and we all suffer as a result.

[Protagoras]

I think that where the employee is also a spouse, then the transfer may be a 'gift' and therefore tax-free.

The same would not be the case for a non-spouse family member, as I understand it.

Will be interesting to hear what OP's accountant advises.

[WTFH]

I think that where the employee is also a spouse, then the transfer may be a 'gift' and therefore tax-free.

Transfer of what?
You can't pay your spouse as an "employee" and claim it is a tax-free gift.

[Protagoras]

Transfer of what?

Indeed. When considered in the context of 'transfer of what', it's not the other spouse's money to gift, it's the company's.

I think I need a snooze before dinner.