First Contract - Various Questions

[bold]

First of all apologies but I'm sure these have been asked a million times before

1 ) Paying Dividends , I understand I can pay these as often as I like , I have a 70-30 shareholding with the wife, me being Director with the majority share, wife is purely shareholder nothing else, when I pay dividends do I have to pay all shareholders ? or can I just choose to pay the misses or myself ?

2) Now this is a Tax one, so i apologise if its complete nonsense . I am moving from Perm to Contract, what happens to the Income tax/NI I have already paid this tax year, come the end of this month I would have already paid approx £3500 in Tax/NI this tax year, does all this get sorted when I fill in my personal Tax return, and does it affect how much I should pay myself salary wise from my LTD company ?

3) Shareholder and opening business bank account, I applied for a business bank account but because my wife is down as 30% SH, they needed her to come to branch in person with ID etc etc, even though she will have nothing to do with the bank account or business anyone know the reason for this ?? causing a bit of a pain because i need account open asap, and we both work so getting to branch is causing me hassle.

Thanks for reading
Bold

[Craig@Clarity]

Hi Bold,

1. Assuming that your shareholdings are 70:30 split of the same class and type of shares (Ordinary £1 shares), in a simple case, everytime you pay yourself a dividend from the company, you need to pay all the shareholders according to the split. You can't pay yourself a dividend and miss out your wife. You can if the shares are of differing class (Alphabet shares) but then it would defeat the objective of having your wife included in the company and expose yourself to ITTOIA 2005 section 626 of Chapter 5 of Part 5 (what was known as s660)

2 . If you have overpaid income tax in your permanent job then it could work out that you get a tax refund through the payroll in your own company otherwise it would come out in the wash on your personal tax return. The NI is calculated based on your salary per employer so there won't be any refund there.

3. It's all to do with anti money laundering regulations. The bank (as well as your accountant if you have one or are about to appoint one) will need to see proof of ID for all major shareholders in order to satisfy the criteria set by the regulations. It's just something that has to be completed unfortunately.

Hope this helps.

[Fred Bloggs]

1 Both of you get dividends in the poportion 7:3

2 All sorted out when you do your tax return

3 Go to a bank that doesn't need this stuff. I opened an account with Abbey (now Santander) with no hassle at all and no trips to a branch. Free banking too.

[bold]

Thanks

Thanks for prompt replies,

All makes more sense now, just a quick one will it make more sense to pay my wifes dividends into her own personal account rather than our joint account ?

Cheers

Bold

[Craig@Clarity]

Thanks for prompt replies,

All makes more sense now, just a quick one will it make more sense to pay my wifes dividends into her own personal account rather than our joint account ?

Cheers

Bold

On one hand (and seriously) it doesn't really matter as long as you have the correct dividend declaration and vouchers issued. On the other hand (jokingly), it depends how much you love your wife which will determine which account to pay it into

[DaveB]

Thanks for prompt replies,

All makes more sense now, just a quick one will it make more sense to pay my wifes dividends into her own personal account rather than our joint account ?

Cheers

Bold

On one hand (and seriously) it doesn't really matter as long as you have the correct dividend declaration and vouchers issued. On the other hand (jokingly), it depends how much you love your wife which will determine which account to pay it into

I may be wrong on this but I had been advised previously that this was a no-no. If Hector thinks you are paying divi's to the wife and then getting access to the cash via the joint account then they could claim it was done to avoid paying tax on the share given to your wife as you then get the money anyway.

I was advisd to keep seperate accounts to avoid this issue.

[Craig@Clarity]

I may be wrong on this but I had been advised previously that this was a no-no. If Hector thinks you are paying divi's to the wife and then getting access to the cash via the joint account then they could claim it was done to avoid paying tax on the share given to your wife as you then get the money anyway.

I was advisd to keep seperate accounts to avoid this issue.

Out of interest, what did your advisor say would be the consequence if that happened?

[DaveB]

Out of interest, what did your advisor say would be the consequence if that happened?

This was a few years ago now so memory is hazy but it was along the lines of Hector taking a view that since the money was available to me via the joint account the share distribution was a purely artifical means to avoid paying tax and would try to claim it was evasion.

[Craig@Clarity]

This was a few years ago now so memory is hazy but it was along the lines of Hector taking a view that since the money was available to me via the joint account the share distribution was a purely artifical means to avoid paying tax and would try to claim it was evasion.

It might have been pre-Arctic days perhaps. Have a look at this link http://www.legislation.gov.uk/ukpga/2005/5/section/626 Provided the conditions are met in the link, I don't think it's an issue paying into a joint account as any income the wife receives is taxable under her income. If you do speak to your advisor again on this issue, ask what the tax consequence would be. Probably nothing I suspect.

[DaveB]

It might have been pre-Arctic days perhaps. Have a look at this link http://www.legislation.gov.uk/ukpga/2005/5/section/626 Provided the conditions are met in the link, I don't think it's an issue paying into a joint account as any income the wife receives is taxable under her income. If you do speak to your advisor again on this issue, ask what the tax consequence would be. Probably nothing I suspect.

I think the issue was that as my other half doesnt work she would pay no tax on the dividends as the total would not take her into the upper tax bracket over the course of the year. If it had been paid soley to me I would have gone into the upper bracket and paid tax on the surplus. By paying the divi to her and then having access to the money via the joint account I was effectivly getting all the dividends but paying no tax on them despite having an income effectivly over the upper limit.

This was pre Arctic though as you say, and it was a moot point anyway as we dont have a joint account.