LTD Company spouse as shareholder query

[Wanderer]

I agree - I was referring to the original suggestion rather than the later one of making the mum a shareholder (I'd missed that suggestion, thought it was to pay mum as an employee rather than a shareholder).

OK, fair point!

However, my point still remains - as long as you follow the law set by that case, you'll be fine

Ahh, so you think he should marry his mum then?

As long as your mother is doing 20% of the work and bringing in 20% of the income then you'll be OK. If she isn't doing both of those things, then you'll struggle to justify that it doesn't fall foul of the settlements legislation if there was an investigation.

Agree 100% with that.

Perhaps the accountant is taking the OP's description of the situation at face value or this is routine and they don't perceive it as a high risk strategy anyway. Personally, I think they should have come back with a statement like that one by TheFaQQer above....

[northernladuk]

If the plan now is to give shares to mum, and she does bugger all for them, gets a dividend which comes back to the OP, then yes. The Ramsay Principle makes it pretty clear.

If the plan is to have mum work for salary, then it becomes a little harder, since some money could come out this way, as long as it is a reasonable wage for the work that they are doing, so that it passes the arm's length test. That's unlikely to make too much difference to paying off £150k though.

So, choices are:

1) Do nothing. Take dividends and pay the additional tax on those as necessary.

2) Gift shares to the wife and pay dividends to both husband and wife. Arctic makes this clear as allowable.

3) Employee mum on a real wage, do nothing with shares. Ain't going to make much of a dent in £150k.

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Personally, I'd either pay the extra tax and leave it as it is, or gift the shares to the wife (factoring in the additional student loan repayments as well).

Agree with all this and as is always the case in these types of request, there is no requirement or intention to have the mum doing anything, it is just a tax sham.