Company Secretary.

[DaveP]

I'd like to extract more cash out of my Ltd Company for myself.

I pay myself minimum wage & take the max dividend each month.

However I am not getting enough cash out still, so I thought if a starting paying my company secretary a wage low enough to be except for NI & tax, then I could 'on paper' pay them, but transfer the cash to my own personel account.

Is this possible & normal practice ?

[DaveB]

I'd like to extract more cash out of my Ltd Company for myself.

I pay myself minimum wage & take the max dividend each month.

However I am not getting enough cash out still, so I thought if a starting paying my company secretary a wage low enough to be except for NI & tax, then I could 'on paper' pay them, but transfer the cash to my own personel account.

Is this possible & normal practice ?

Normally the Co. Sec. is not an employee or Director although they can be a shareholder. There is no issue putting them on the payroll in order to pay them a wage but HMRC are picking up on this more and more and you would need to be able to show that the wage was commesurate with the amount of work done. You would also need to account for employers NI and Income Tax, even if the amount in question was low enough that none would be due.

Simply showing the money going out of the co. as "wages" and paying it into your own account is Fraud / Tax Evasion.

[DaveP]

Normally the Co. Sec. is not an employee or Director although they can be a shareholder. There is no issue putting them on the payroll in order to pay them a wage but HMRC are picking up on this more and more and you would need to be able to show that the wage was commesurate with the amount of work done. You would also need to account for employers NI and Income Tax, even if the amount in question was low enough that none would be due.

Simply showing the money going out of the co. as "wages" and paying it into your own account is Fraud / Tax Evasion.

I am the only Director owning 100% of the shares.
Could I make the secretary a shareholder but not an employee & pay them a dividend ?

[DaveB]

I am the only Director owning 100% of the shares.
Could I make the secretary a shareholder but not an employee & pay them a dividend ?

Yes you can, but remember that the divident payments must be in proportion to the number of shares held and you may need to actually sell them the shares rather than just making them a gift. A proper accountant can tell you all the details.

In addition, once shares have been issued you cannot simply take them back and evey time a dividend is declared *all* shareholders must be paid unless they voluntarily decline their dividend. This can be an issue down the line if you have made a friend or partner a shareholder and subsequently fall out. They would still be entitled to dividend payments whether you want to pay it to them or not. Even if they did decline the dividend you could not simply allocate that dividend to yourself. The money would have to be rolled into the total amount available for the next declaration, which would still need to be split accoding to the shareholding.

If the new shareholder is also a family member you may end up falling foul of the proposed new legislation on Income Shifting due to come in next year.

Doing this will not allow you to take more money out of the co. overall since the total dividend available will remain the same, what it will do is potentially reduce the amount of income tax you end up paying, especially if it means you end up below the higher rate threshold.

Finally, you should not pay a dividend to the other shareholder and then have them immediately transfer the money back to yourself as in the event of an HMRC investigation you would almost certainly find that they treat it as your personal income anyway and tax it as such, along with penalties/fines etc for evasion.

[Nixon Williams]

Company Secretary Salary

You can pay a salary to a company secretary but HMRC can question the level of salary paid. I think you would be hard pressed to justify a workload in excess of say 1-2 hours per month and at a hourly rate of say £10, this will only produce an annual salary of upto £240 – not really worth the extra admin.

Any salary should be paid to the person, a false salary/dividend is clearly fraud and tax evasion.

Dividends

Anyone can be a shareholder, they do not have to be a director or company secretary. The proposed Income Shifting legislation aimed to attack the splitting of dividend income, however for now this has been postponed. Assuming that you are married to the proposed shareholder then a transfer may be made free of Capital Gains Tax implications.

This option is really only available to married couples, it is not available to unmarried partners, friends, family members etc.

Again any dividend should be paid to the shareholders pro-rata to their shareholding, you should not pay it all to one, or transfer the funds back etc. This is clearly what HMRC would be looking for.

I hope this helps.

Alan

[Earlyflash1]

Dividends
Assuming that you are married to the proposed shareholder then a transfer may be made free of Capital Gains Tax implications.

This option is really only available to married couples, it is not available to unmarried partners, friends, family members etc.

I assume you are referring here to the transfer of the shares (gift), rather than a selling of shares.

AFAIK, anyone can own shares in a limited company, regardless of their relationship to you.

[TheFaQQer]

Is this possible & normal practice ?

Possible - yes.

Normal practise - no, since it's fraud.

[stphnstevey]

Don't know why everyone is taking the moral high ground - the choice of paying someone a salary to avoid higher taxation is a perfectly legitimate business decision.

Where that money goes after that (ie back into your account) could be questionable

Income Shifting legislation has not yet come in and it has been delayed coming - whether will actually come is unknown

Therefore, make the best of what you can do now

[stphnstevey]

See this
http://www.contractoruk.com/s660/wha...ction_660.html