LTD Company spouse as shareholder query

[northernladuk]

One more question guys if you don't mind. Is it ok for your mother to be the other shareholder or can it only be your wife?

Cheers.

You didn't bother reading any of the advice from at least 4 posters on this thread or the link that Gemma post for you did you? I know it doesn't answer every single question you might have but the idea is to read and understand the information and from that knowledge some questions you can answer yourself.....

Or you could read the thread that is 4 below this one which also covers it... Gotta step up if you are gonna mess with this kinda stuff.

http://forums.contractoruk.com/accou...-shifting.html

[busgrw]

You didn't bother reading any of the advice from at least 4 posters on this thread or the link that Gemma post for you did you? I know it doesn't answer every single question you might have but the idea is to read and understand the information and from that knowledge some questions you can answer yourself.....

Or you could read the thread that is 4 below this one which also covers it... Gotta step up if you are gonna mess with this kinda stuff.

http://forums.contractoruk.com/accou...-shifting.html

I read what I needed to to understand from a husband and wife perspective. Didn't come across anything regarding using one's mother albeit I didn't read every article or link in its entirety given my time is limited. I could no doubt find out for myself by spending a multiple hours if not a day or two in between work trawling websites and articles but decided to ask people with the knowledge directly.........that's what a forum is for isn't it?

.......dick!

[northernladuk]

I read what I needed to to understand from a husband and wife perspective. Didn't come across anything regarding using one's mother albeit I didn't read every article or link in its entirety given my time is limited. I could no doubt find out for myself by spending a multiple hours if not a day or two in between work trawling websites and articles but decided to ask people with the knowledge directly.........that's what a forum is for isn't it?

.......dick!

Well the fact it explicitly mentions wife is the answer really isn't it. The only reason it works is because you are husband and wife... which kinda answers your question.

There is a link on the right hand column titled S660.. It is a one page overview and there are 3 other guides. Won't take long to read them but they will give you idea enough to answer questions such as these.

It is the point of the forum but if you can't be arsed to help yourself don't expect much extra help. I would have though bearing in mind you wanted to keep it all above board you would make the time to read it. You can't base your future on the musings of a load of random people on a free forum.

[busgrw]

Well the fact it explicitly mentions wife is the answer really isn't it. The only reason it works is because you are husband and wife... which kinda answers your question.

There is a link on the right hand column titled S660.. It is a one page overview and there are 3 other guides. Won't take long to read them but they will give you idea enough to answer questions such as these.

It is the point of the forum but if you can't be arsed to help yourself don't expect much extra help. I would have though bearing in mind you wanted to keep it all above board you would make the time to read it. You can't base your future on the musings of a load of random people on a free forum.

The fact i'm researching, whether through forum responses or otherwise, surely is evidence enough that i'm trying to help myself.

Anyway, done trying to defend myself for looking to others more in the know than me for help and advice. Thanks for the steers Northern, and for making my experience straight forward and pleasant .................cough cough

Will read the one page overview now.

[Wanderer]

That article suggests that you can income split with someone who is not a spouse or civil partner so long as they "become a director of the company and plays a significant role in the management of the company" and that "the share allocation should reflect the work undertaken by the two parties".

This would be true if the other shareholder was also a fee earning contractor but if it's your mum/sister/daughter/granny who doesn't actually earn any fees for the company then it's just not going to work because such an arrangement would be caught under the settlements legislation and the S660A exemption won't apply.

People are free to do whatever they want but when they get investigated by HMRC they will have to repay the tax with interest and penalties so I guess it's up to the individual to decide what level of risk they are willing to take.

For avoidance of doubt, income splitting with your mum is not going to be allowed.

[busgrw]

That article suggests that you can income split with someone who is not a spouse or civil partner so long as they "become a director of the company and plays a significant role in the management of the company" and that "the share allocation should reflect the work undertaken by the two parties".

This would be true if the other shareholder was also a fee earning contractor but if it's your mum/sister/daughter/granny who doesn't actually earn any fees for the company then it's just not going to work because such an arrangement would be caught under the settlements legislation and the S660A exemption won't apply.

People are free to do whatever they want but when they get investigated by HMRC they will have to repay the tax with interest and penalties so I guess it's up to the individual to decide what level of risk they are willing to take.

For avoidance of doubt, income splitting with your mum is not going to be allowed.

Thanks Wanderer. The way I see it, this is probably the better option for me as my mother will actually be working for me doing company accounts and other mgt stuff so I wouldn't be taking the p*ss. Even though my mother earns a lot less than my wife, I would keep the split at 80/20 so not taking full advantage of my mothers tax allowance. Ran it by my accountant (SJD) last night who confirmed it would be ok so will look into it a bit more and decide next week.

Cheers.

[Wanderer]

my mother will actually be working for me doing company accounts and other mgt stuff so I wouldn't be taking the p*ss. Even though my mother earns a lot less than my wife, I would keep the split at 80/20 so not taking full advantage of my mothers tax allowance. Ran it by my accountant (SJD) last night who confirmed it would be ok so will look into it a bit more and decide next week.

It's a great cover story but be aware that HMRC will try to pick holes in it when then investigate you and their opening line (rightly or wrongly) will be that you are doing this to avoid tax and you have created a "settlement" which is taxable on you.

There are a couple of problems:

1. You wouldn't employ a stranger to do the work your mother does and pay them the same amount of money (fails the arms length test)

2. This money will now be your mother's money and she cannot simply gift it back to you (either in cash or in kind like buying a car or other goods which are gifted to you)

3. If she dies (heaven forbid) then her assets will be shared out according to her will or the intestacy laws so you may or may not get back what you see as "your money".

Think carefully about what you are going to do here.....

[TheFaQQer]

Gotta step up if you are gonna mess with this kinda stuff.

Can someone add this to the NLUK comment generator, please?

[TheFaQQer]

2. This money will now be your mother's money and she cannot simply gift it back to you (either in cash or in kind like buying a car or other goods which are gifted to you)

Technically, she can, but there are limits on what can be gifted without it incurring tax, and whether it would still fall within the estate if she died within a certain time period.

For example, my grandad gave a reasonably substantial sum to me, my brother and my sister, but it had to be accounted for and recorded so that if he died within a few years, it would essentially revert to his estate for IHT purposes.

[Wanderer]

Technically, she can, but there are limits on what can be gifted without it incurring tax, and whether it would still fall within the estate if she died within a certain time period.

Yes, if it someone gifts ther own money up to a certain limit it becomes a "potentially exempt transfer" for inheritance tax purposes provided they survive for a certain time after the gift (7 years?).

However, that is presuming that she earned the money herself in the first place which HMRC will argue isn't the case here. They will argue that the company director gave shares to a connected person (other than a spouse or civil partner) in an arrangement they wouldn't have entered into at arms length with a stranger and that connected person gifted the money back to the director (in cash or in kind) which creates a settlement and is therefore taxable on the the settlor (ie, the director).

If people were allowed to do this then everyone would make their kids shareholders and pay them dividends then raid their bank accounts...