LTD Company spouse as shareholder query

**tractor** · 12 March 2013, 20:12

Originally posted by busgrw View Post

Hi,

Hoping someone can advise. I am a contractor with a ltd company and am the sole director. I have a debt of £150k (Mums mortgage) which needs maid off in July 2015 so i'm trying to find out all the ways to minimise my tax payments so when the time comes I can pay it off. One option I was looking at was to bring my wife in as a shareholder (20%) so as to pay her dividends until 2015 date. After that I was going to remove her as a shareholder.

My question is, would removing her have any impact on the money currently in the business account or can she in effect step down as a shareholder without 'cashing in' her shares as I don't want to be transferring 20% of the Business profits across and incurring income tax on it. How would this work?

Any advice appreciated.

P.S. Any other options for reducing my tax to pay off the debt would be welcome.

You can't just make someone a shareholder because you feel like it. If it is a going concern, they have to buy the shares from you at market (balance sheet + calcs + acctant fees lol) value.

**busgrw** · 12 March 2013, 20:43

Originally posted by tractor View Post

You can't just make someone a shareholder because you feel like it. If it is a going concern, they have to buy the shares from you at market (balance sheet + calcs + acctant fees lol) value.

Hi, I don't really understand, I was led to believe by my accountant that it was pretty straight forward. I thought this was an option a lot of contractors took to minimise their tax payments?

So, from what you are saying (roughly speaking), if I had £100k in the business and made my wife a 20% shareholder then she would have to pay me £20k?

**eek** · 12 March 2013, 20:48

Originally posted by tractor View Post

You can't just make someone a shareholder because you feel like it. If it is a going concern, they have to buy the shares from you at market (balance sheet + calcs + acctant fees lol) value.

Different rules apply between husband and wife. Heck you can transfer entire billion pound companies between wife and husband without HMRC batting an eyelid (look at Philip Green and the actual owner of Burtons, top shop...) because there is an exception to the standard rules for transactions between husbands and wifes.

However you can't continually change share holdings. find an appropriate figure (for tax reasons) and stick to it. Worst case you can always close the company and restart if things change.

**tractor** · 12 March 2013, 20:59

Originally posted by eek View Post

Different rules apply between husband and wife. Heck you can transfer entire billion pound companies between wife and husband without HMRC batting an eyelid (look at Philip Green and the actual owner of Burtons, top shop...) because there is an exception to the standard rules for transactions between husbands and wifes.

However you can't continually change share holdings. find an appropriate figure (for tax reasons) and stick to it. Worst case you can always close the company and restart if things change.

It's true, there are gifting rules and concessions but Eek is right, I just could't be bothered to explain it because I saw it as just another 'I want to make more money, can I claim my lottery tickets on expenses' marlarkeys. Perhaps I was a little harsh sorry, but we do get a lot of those kind of questions here.

**northernladuk** · 12 March 2013, 21:30

Originally posted by tractor View Post

It's true, there are gifting rules and concessions but Eek is right, I just could't be bothered to explain it because I saw it as just another 'I want to make more money, can I claim my lottery tickets on expenses' marlarkeys. Perhaps I was a little harsh sorry, but we do get a lot of those kind of questions here.

We do, and this is one of them and your response was pretty good I thought. Your business is not there to screw around with when you feel like it. HMRC are aware of this hence the advice around not changing shareholdings. This would indicate someone doing something they don't like and will be round with a full audit pretty quickly. IR35 investigations are normally kicked off by a tax inspection I believe as well.

You know your own finances but I am betting the warchest is going towards paying this off as well which isn't the best idea.

Rather than pushing my company to the limits of what is right and wrong can you not focus on how to extend the mortgage or something? Mortgages are one of the cheapest ways to borrow money nowadays so surely better to try extend it rather than get taxed on your money at a much higher rate in an effort to get it out quick?

Also have you tried asking your accountant who will know your situation a lot better than us?

**busgrw** · 12 March 2013, 22:06

Originally posted by eek View Post

However you can't continually change share holdings. find an appropriate figure (for tax reasons) and stick to it. Worst case you can always close the company and restart if things change.

Thanks Eek. Appreciate the steer. I wouldn't be continually changing shareholdings, just the once to get the debt paid then reversing it. I'd heard about closing the company as an option but apparently I can't restart under the same type of employment if I do that.

Originally posted by tractor View Post

It's true, there are gifting rules and concessions but Eek is right, I just could't be bothered to explain it because I saw it as just another 'I want to make more money, can I claim my lottery tickets on expenses' marlarkeys. Perhaps I was a little harsh sorry, but we do get a lot of those kind of questions here.

No problem tractor. Easy for me to say it but i'm honestly not one of those 'malarkeys'. I just need to save as much as I can to pay off the debt in 2015. Appreciate the info you've given.

Originally posted by northernladuk View Post

We do, and this is one of them and your response was pretty good I thought. Your business is not there to screw around with when you feel like it. HMRC are aware of this hence the advice around not changing shareholdings. This would indicate someone doing something they don't like and will be round with a full audit pretty quickly. IR35 investigations are normally kicked off by a tax inspection I believe as well.

You know your own finances but I am betting the warchest is going towards paying this off as well which isn't the best idea.

Rather than pushing my company to the limits of what is right and wrong can you not focus on how to extend the mortgage or something? Mortgages are one of the cheapest ways to borrow money nowadays so surely better to try extend it rather than get taxed on your money at a much higher rate in an effort to get it out quick?

Also have you tried asking your accountant who will know your situation a lot better than us?

So easy to judge northernladuk. You don't know my situation so would appreciate the benefit of the doubt. I'm not trying to screw around with my business when I feel like it. I'm not experienced in this area so asking advice. Not trying to do anything illegal.

Afraid I don't understand your warchest comment. Can you elaborate please?

The situation with the mortgage is that it's my mothers house and mortgage. She is nearly 63 and the mortgage term finishes when she hits 65 and has to retire. I'm hoping that when we get to the time that we can negotiate a remortgage but in the current climate, i'm not sure that will happen so I need to contingency plan in case they ask for the full repayment. Will see what happens.

Should have asked my accountant today but forgot hence my query here. I'll drop her a note tomorrow but thought it would be good to get the input of experienced folk here.

Thanks all.

**northernladuk** · 12 March 2013, 22:25

A warchest... the thing that keeps a roof over your head when you are out of contract for anything up to six months, particularly in the current climate.

Obviously we take short term roles and there is no guarantee we will drop straight in to another role. There are guys on here that have had to take 3,4 and sometimes more months without work which means zero income. The warchest is your pot of money you have saved up to cover this eventuality. The idea is even though you seem to be on big dollah you work hard to spend as little as possible and get the warchest up in case you don't get the next gig etc.... When you have a good warchest and won't tulip bricks when your contract ends you can start spending.

This might be interesting reading..

http://forums.contractoruk.com/busin...war-chest.html

A poster that had to go perm...(and that was in the years it was supposed to be busy)

http://forums.contractoruk.com/busin...-perm-bye.html

Some more light reading about lack of warchest..

http://forums.contractoruk.com/busin...ar-chests.html

**busgrw** · 12 March 2013, 22:37

Originally posted by northernladuk View Post

A warchest... the thing that keeps a roof over your head when you are out of contract for anything up to six months, particularly in the current climate.

Ahh, gotcha. Cheers for the info. In that case, i'm not planning to use the warchest to contribute to the pay off of the loan. Got about £35k in the warchest at the moment which should hold me over for around 14 months. Planning on raising the funds to pay off the mortgage from now. Need a good wind in my sail though to minimise the gaps in between contracts.

Cheers northern.

**northernladuk** · 12 March 2013, 22:42

Originally posted by busgrw View Post

Ahh, gotcha. Cheers for the info. In that case, i'm not planning to use the warchest to contribute to the pay off of the loan. Got about £35k in the warchest at the moment which should hold me over for around 14 months. Planning on raising the funds to pay off the mortgage from now. Need a good wind in my sail though to minimise the gaps in between contracts.

Cheers northern.

Eh? People normally call me a dick or a keyboard warrior or something. Feels very strange

Another though, although I don't personally like the idea of setting up the wife purely to use her tax breaks..... if it is the most efficient way of getting your money out of the business why do you intend to do it for a short term and then stop? If the only warning flag is you re-hashing the company structure why would you change it?

LTD Company spouse as shareholder query