New company strucure - recommendation please

[moorfield]

HMRC argued the husband was simply giving his income to his wife, so he should be taxed on it. The Lords disagreed.

Because they were/are all doing it too...

[matrixfan]

ok, many thanks

another option I was considering was to register a new 2nd company in name of my spouse and then pay her company for the services she offers i.e. marketing, admin etc but there is the overhead of maintaining the accounts of two different companies

[Platypus]

another option I was considering was to register a new 2nd company in name of my spouse and then pay her company for the services she offers i.e. marketing, admin etc but there is the overhead of maintaining the accounts of two different companies

Overly complex and two lots of accounting fees!

[Ruse]

Having a spouse with 50% of the shares is still ok tax avoidance. HMRC challenged it recently and lost in the High Court (Arctic Systems case if you want to Google it).

HMRC have since talking about creating some income shifting rules to prevent that type of setup working in future, but the rules were tosh and never implemented.

So basically yes, you can do everything you've suggested. Only caveat is that you'll need to justify wages to your spouse. Assuming you're only likely to pay them ~£5.7k as you will yourself, it's not too hard to justify a wage of that size.

Doing things that way, on profits of up to around £100k you can get ~81% in your pocket.

My understanding of the new Company Law rules is that it would now be possible to have your spouse as the sole director and the fee earner as Co. Sec., is there any issue with structureing this way around ?

[Ruse]

My understanding of the new Company Law rules is that it would now be possible to have your spouse as the sole director and the fee earner as Co. Sec., is there any issue with structureing this way around ?

In fact I understand that there is now no need to have a Co Sec any more. So could spouse be sole director and fee earner just be a shareholder ?

[rootsnall]

Do most people (with a non-working spouse) do this? My Mrs is at home looking after our little 'un. She currently has no association with MyCo, other than being the registered secretary at Companies House so she can sign all the necessary paperwork to close up MyCo and get funds distributed should I get hit by a bus........

I was told that it was kind of frowned up by hmrc as it was pretty much blatant tax evasion, but if that isn't the case should I perhaps reconsider and make her an employee/director?

I'm 75% me / 25% the non working Mrs, and she isn't an employee, this was the 'recomended' setup many moons ago ie. 50/50 would put you more on hectors radar. There is probably (?) no advantage to making the Mrs an employee as you are not paying NI on the divis and the tax saving is all about using her lower tax band. I considered upping the Mrs cut from 25% but with dwindling rates, laziness, and healthy pension payments I'm managing to not pay any higher rate tax on my 75% anyway.