Limited Company - Income Splitting yes or no?

[Bod]

At the end of the day its your company and you can do what you want, you can ignore the accountants advise, I can't see that they would refuse to do what you ask.

I absolutely agree, but would prefer to have something in writing from my accountant saying something along the lines of : "At the current time, considering current tax law and case history, we see no issue with gifting ordinary shares to your partner".

I accept that I may not get this without a change of accountant I could more readily understand their position if I were requesting the creation and gifting of preference shares and/or wanting to use dividend waivers etc. I get the impression more and more lately, that they object to anything beyond the absolute standard accounting procedures - and their risk aversion is always in their favour and not in my best interests - it's beginning to grate.

Thanks for the reply, I'll look into the CGT implications.

[Hex]

It is almost certainly the CGT implications. You can transfer assets between spouses with no CGT implication as a concession. With anyone else, you are giving them valuable assets for no (or little) cost - certainly not what they're worth, so the difference between what they're worth and what your charge for them will be considered a gift. This gift may be taxable.

Best to ask your accountant to explain it fully as I'm not 100% on how the above works, but I think you'll find any accountant will say the same.

[johnbig]

hi, could the unmarried partner set up a company from which to pay herself £589 pcm?

sorry i couldn't find any similar posts.
i was just thinking if i could set up a second ltd for my partner, obviously to reduce my corporation tax in 2011-2012.
i'm contracting outside ir35, earning under £25,000 per annum.
£589 per month or £7072 per year in wages and £3000 expenses would leave me roughly £15,000 in profit or £12,000 net dividends and £3,000 ct.
so it means a lot to me if i can avoid £1500 in ct through paying just over £589 per month into the other ltd.
what do you think?
will it be anywhere close to s660?
thanks in advance

[eek]

sorry i couldn't find any similar posts.
i was just thinking if i could set up a second ltd for my partner, obviously to reduce my corporation tax in 2011-2012.
i'm contracting outside ir35, earning under £25,000 per annum.
£589 per month or £7072 per year in wages and £3000 expenses would leave me roughly £15,000 in profit or £12,000 net dividends and £3,000 ct.
so it means a lot to me if i can avoid £1500 in ct through paying just over £589 per month into the other ltd.
what do you think?
will it be anywhere close to s660?
thanks in advance

Why on earth do you want a second limited company. Just find some work (for the company) that she can do that justifies earning £589 a month and per her that money from the first company.

[Wanderer]

sorry i couldn't find any similar posts.
i was just thinking if i could set up a second ltd for my partner, obviously to reduce my corporation tax in 2011-2012.
i'm contracting outside ir35, earning under £25,000 per annum.
£589 per month or £7072 per year in wages and £3000 expenses would leave me roughly £15,000 in profit or £12,000 net dividends and £3,000 ct.
so it means a lot to me if i can avoid £1500 in ct through paying just over £589 per month into the other ltd.
what do you think?
will it be anywhere close to s660?
thanks in advance

As eek says, the best option is probably to make your partner an employee of the limited company and deal with it that way. Your partner setting up a LTD will cost a whole lot in admin and accountants fees...

The fine print is that your "employee" should actually do some work for the company, perhaps you could put your partner to work as a personal assistant or book keeper. Also understand that the money will belong to your partner, not you. If they just give it straight back to you then you could get in trouble and the money may be treated as income if you get investigated. If they used it to pay the rent food shopping etc then you are probably OK.

Of course HMRC won't be impressed with this if you get investigated. I mean a company director earning £25k and paying £7k to a PA or book keeper who just happens to live with the director. But then again you could say that you wouldn't trust anyone else to do that job for you. Have a talk to your accountant about it and see what they think.

[johnbig]

thank you for taking the time replying. but i'm going back to my question, would i not be much safer with a second ltd?
i ended up doing all the paperwork myself as the accountant was only bothered to charge me a fee upfront when registering with him.
and then he didn't even send CT41G (New company details) to HMRC.
i've started doing all myself to avoid penalties so as i've become more familiar with p11calculator, p46 p11 p14 p35 p60 annual return, changing accounting refference dates to line up. and i can handle the payroll, and dividends vouchers, the accountant will actually do the corporation tax return.
have i covered it all? quite a waste of money £500 to the accountant just for the corporation tax.
out of topic i'm thinking to go for an accountancy course myself now.
to get back to the topic, if this is all i've got to do regarding the company, as the accountant is not doing anything or teaching me what is to be done, i can handle doing this for 2 companies.
am i wrong to think i can get aways with paying invoices of £700 a month to the second company? it will only cost me £200 quid formation and corporation tax.
still £1000 savings on my corporation tax, and no family business tax or s660 i hope.
thank you for your views!

[Wanderer]

thank you for taking the time replying. but i'm going back to my question, would i not be much safer with a second ltd?

I don't think there is any advantage. If it came to the nuclear option then HMRC could potentially just wave away the new LTD structure as a veil and treat things as if it didn't exist.

I'd recommend you just pay a salary, it's simple to set up and lots of people do it. It will save all the extra admin (and expense if you value your time) of running a second company.

[garnet]

Back on this topic again.
At the moment I own 100% of the shares (100) of my LTD.
My accountant advises I make my wife 50% shareholder and also employ her in the ltd co on ~£8000/pa.She will be doing actual work, so justifying her being an employee is not a problem should HRMC query that.
My questions are:
How can I make her 50% shareholder now?
Is there anything I need to worry about e.g S660?

[northernladuk]

Back on this topic again.
At the moment I own 100% of the shares (100) of my LTD.
My accountant advises I make my wife 50% shareholder and also employ her in the ltd co on ~£8000/pa.She will be doing actual work, so justifying her being an employee is not a problem should HRMC query that.
My questions are:
How can I make her 50% shareholder now?
Is there anything I need to worry about e.g S660?

Why don't you ask your accountant?

[Murder1]

Back on this topic again.
At the moment I own 100% of the shares (100) of my LTD.
My accountant advises I make my wife 50% shareholder and also employ her in the ltd co on ~£8000/pa.She will be doing actual work, so justifying her being an employee is not a problem should HRMC query that.
My questions are:
How can I make her 50% shareholder now?
Is there anything I need to worry about e.g S660?

Won't your accountant facilitate the share transfer/sale?