Ltd Co Issues

[Joolakker]

Hi all,

Hopefully someone can give me some advice. My situation is that I have my own Ltd co and have been working through it for about 9 months. For various reasons I will now be going perm. My wife has been working as a permie for last few years, but will now start contracting from next month. So my question is: can I give her say 40% of the co. and then she starts working through my co? If yes, it raises a few more questions:

a. Will there be any tax implications if I give her 40% as there is about £40k in co's bank account?

b. If she takes dividends from the income she brings in, do I have to take them as well?

c. Would it be better for her to take no divi or salary as my perm salary is more than enough for both of us?

Thanks in advance for your assistance.

[aceboy]

Sounds like you should really ask your accountant.....

[MPwannadecentincome]

You can transfer shares to wife, dividends have to be paid pro-rated by %age shareholding, so if she has 40% she gets 40% of dividend.

Best to check with accountant - as you have a lot of cash in the company now you may be lucky as accountant might advise to wind up ltd co and take the cash out as capital for which you only have to pay capital gains tax - then get wife to start up another ltd co.

[Carrington Accountancy]

If you were to give your wife 40% of the company shares, this would mean that you would still hold the remaining 60%, and therefore receive 60% of any dividends that are declared.
In terms of taxation, from your post it sounds as though your salary would be in the higher rate threshold, and therefore any dividends received would be subject to further higher rate tax.
Therefore, it would be advisable to contact your accountant in regards to capital repayment, as this is only subject to 10% Entrepreneurs Relief after your annual Capital Gains allowance of £9600 (2008/09). However, this is only available at 10% where you have been trading for more than 1 year.
Depending on your wife's personal circumstances, it might be advisable to allocate some shares to your wife prior to the Capital Repayment and closure of your company.
This would then leave your wife to set up her own limited company. It would be advisable to seek professional help in setting up that company.

[where did my id go?]

I'm sure that I was once told that it was possible to waive dividends - and the result was that 'your' divi stayed inthe company.

Any accountant care to comment?

[Accounting Sage]

Well this is an ideal situation where husband wife work with the same company. As you are less likely to attract IR35.

a. there is no capital gain on transferring shares to wife or civil partner.
http://www.hmrc.gov.uk/cgt/shares/calc-cgt-08-09.htm

b. All monies you both earn will come in same pot.

c. taking two persons salary will give you extra tax-free personal allowances and an extra basic-rate tax band.

You need to follow certain formalities when making dividend payment

Dividend payments should be correctly recorded in company's accounting records.

[Joolakker]

Thanks all. Think the best solution is for me to keep contracting and have my wife as a shareholder.