Husband - Wife shareholding

[THEPUMA]

No, Diana paid cash for her share at the time the company was set up.

That is the same as what I am saying. Diana was allotted shares for which she paid.

I think in your circumstances, unless the cash was physically paid into the business and then back out to you again, she has not invested in your business. From HMRC's perspective, you have to look at what type of investment return you would have given to an unconnected investor.

My guess is that in those early days, if I had come up to you and offered you £5K to see you through the first month and asked for a 10% shareholding, you would have told me where to go and borrowed the money from a bank instead.

But this is all a moot point unless and until HMRC win the case or change the legislation.

[ASB]

If it were me, and I wanted to draw more than I personally could tax free, I would pay the balance to my wife (assuming she weren't a higher rate taxpayer). There is certainly a chance that any dividend paid to her won't be taxable whereas any dividend paid to you (over the HRT threshold) is certainly going to be taxable. So what's the downside?

Downside?

Presumably statutory interest (which could be quite a lot if a case was lost some years after the payments were made). Also possibility of penalties. I don't know if they would go for penalties though.

[THEPUMA]

Downside?

Presumably statutory interest (which could be quite a lot if a case was lost some years after the payments were made). Also possibility of penalties. I don't know if they would go for penalties though.

If the case in June clarifies one way or another then no interest will be incurred as the correct amount of tax should be paid.

If not, the interest is 7.5% so if the additional taxes are invested sensibly at say 3% net, the difference of 4.5% shouldn't exceed £350 pa. This is part of the risk that should be taken into account.

[texto]

If the case in June clarifies one way or another then no interest will be incurred as the correct amount of tax should be paid.

If not, the interest is 7.5% so if the additional taxes are invested sensibly at say 3% net, the difference of 4.5% shouldn't exceed £350 pa. This is part of the risk that should be taken into account.

Lots of differing views here. If I explore the slightly safer option suggested by PUMA - i.e. keep 100% shareholding but gift some shares to wife. She would be subject to CGT if it exceeds 7k or so, isn't it? And I would need to declare this in both our self assessments ..?

How do I go about doing this then?

[rootsnall]

Hello People,

I've just setup a new company and sorting out the shareholding. I've read all about Arctic Systems case and I want to ask if 75/25 split is reasonable or not? My accountant thinks I should retain 100% shareholding but I'm willing to take a chance.

Or should I go a bit higher like 90/10 split? If she manages bank account dividends, invoices etc - what do you think?

PS: Wife is the secretary but has a permanent job with another company. Only I bring money in my company.

Do not RTFM - I have read the forums. Just need more input.


Ta
Texto

If your wife has a permie job elsewhere and is getting paid a reasonable salary then I don't see any point in her being a shareholder as there will be little or no tax to be saved by diverting your income. My Mrs is currently doing the housewife thing so there is quite a bit of tax to be saved by using her tax allowances. I currently reckon its worth the gamble in my case.

[THEPUMA]

Lots of differing views here. If I explore the slightly safer option suggested by PUMA - i.e. keep 100% shareholding but gift some shares to wife. She would be subject to CGT if it exceeds 7k or so, isn't it? And I would need to declare this in both our self assessments ..?

How do I go about doing this then?

No she would pay no tax unless the dividend caused her to exceed the higher rate tax threshold (currently £39,825) and 25% on any excess over this figure.

CGT may be applicable when the company is liquidated.

[texto]

If your wife has a permie job elsewhere and is getting paid a reasonable salary then I don't see any point in her being a shareholder as there will be little or no tax to be saved by diverting your income. My Mrs is currently doing the housewife thing so there is quite a bit of tax to be saved by using her tax allowances. I currently reckon its worth the gamble in my case.

That's the whole point. She's no where near the 10% bracket. Infact she has to pay more tax because of that 10% income tax bracket taken off by idiot chancellor.

[texto]

No she would pay no tax unless the dividend caused her to exceed the higher rate tax threshold (currently £39,825) and 25% on any excess over this figure.

CGT may be applicable when the company is liquidated.

That's interesting Puma. Can you elaborate on how do I go about doing this? Once I have some background info, I'll talk to my accountant. Cheers for the advice.

[THEPUMA]

That's interesting Puma. Can you elaborate on how do I go about doing this? Once I have some background info, I'll talk to my accountant. Cheers for the advice.

Transfer some shares to her. Pay her a dividend. job done.

[ASB]

If the case in June clarifies one way or another then no interest will be incurred as the correct amount of tax should be paid.

If not, the interest is 7.5% so if the additional taxes are invested sensibly at say 3% net, the difference of 4.5% shouldn't exceed £350 pa. This is part of the risk that should be taken into account.

That very true. Of course one has had the benefit of the money in the meantime so in practice that limits the downside.

But, do you have a view on penalties? I really have no idea what happens here in fully contested cases. The only experience I have had of this was a general compliance review in which we negotiated settlement and penalties were eventually 20% which I understood was the minimum. However I am also aware that the PMG did say penalties were not going to be sought in IR35 cases so maybe the same would apply here?