Form 42 Query - Unmarried partner becomes a director

[ian2012]

Hi

Last year my girlfriend joined me to became a director of our company and is now contracting herself and drawing salary/dividends.

Do I need to complete Form 42 showing a transfer of a £1 notional share, or would the fact it was a transfer between a domestic partnership mean I could use that family/domestic/household exemption.

(ie can I claim the transfer was part of normal domestic relationships in that we decided to go into business together, or would the fact she then started contracting under the company mean it would be viewed as employment related). If the share transfer happened before taking any salary would that make a difference?

Also will there be any tax implications if the share was only valued at £1. (ie there are now 2 shares in the company each of £1)

Thanks for your help!

Cheers,
Ian

[malvolio]

Hi

Last year my girlfriend joined me to became a director of our company and is now contracting herself and drawing salary/dividends.

Do I need to complete Form 42 showing a transfer of a £1 notional share, or would the fact it was a transfer between a domestic partnership mean I could use that family/domestic/household exemption.

(ie can I claim the transfer was part of normal domestic relationships in that we decided to go into business together, or would the fact she then started contracting under the company mean it would be viewed as employment related). If the share transfer happened before taking any salary would that make a difference?

Also will there be any tax implications if the share was only valued at £1. (ie there are now 2 shares in the company each of £1)

Thanks for your help!

Cheers,
Ian

If she 's not a spouse or a civil partner, you can't claim it to be a familial relationship. It's a commercial transaction and you would need to sell her the share and record her as a new shareholder.

I assume there were available shares in the company - ie. you haven't just invented a second one.

It makes no difference to company taxes. You get taxed separately on your personal income from all sources. Dividends will have to be issued in proportion to the shareholding, so it's 50% each taken from available net profits in the company.

I'm guessing you don't have an accountant so are doing your own guesswork. Not a good idea...

[Pondlife]

Hello

My fiance already contracts through her own sole limited company. Like most people her contract terms are outside IR35 although she scores very poorly on the new points scheme introduced by HMRC.

I am about to start an IT contract for the first time (for the same client as my fiance), and was planning to become a director of her limited company to simplify administration and avoid the need to set up a separate company.

Would there be any benefit to me becoming an employee instead, given this scores hugely in the new points scheme and would mean we were then low risk?

(I recognise the tax implications on me drawing salary rather than dividends and the risk of not being a director despite generating 50% of revenue). Or would HMRC take a dim view of me being an employee given we both live at the same address?

Thanks!

WTF?

[TheFaQQer]

WTF?

Good spot

Maybe he's busy chasing the aurora with Menelaus?

[Pondlife]

Good spot

Maybe he's busy chasing the aurora with Menelaus?

I look forward to reading the same post this time next year.

[northernladuk]

So I took it you decided to ignore the advice you were giving by one of our resident accountants then? If so what is the point of giving you any more?

http://forums.contractoruk.com/accou...ml#post1578436

If you're contracting long term, and earning over £30k, I'd usually suggest you look to get your own company set up. It keeps things cleaner, and there's no concern over having shares split between an unmarried couple (with the possible income shifting issues that could bring if you split dividends to make better use of both tax bands).

Isn't all this a bit late if she joined you a year ago?

[SueEllen]

Another one who will learn the hard way.

[ian2012]

Well lets see if I can make my question next year much more intelligent then


The HMRC regulations state....

A report is not normally required where shares are transferred by an individual in the
normal course of domestic, family or personal relationships of the person transferring the
shares

hence why I was asking if an unmarried domestic partnership would count given the regulations don't mention anything about marriage/civil partnership.


thanks all for your responses. i'll now run for cover.

[northernladuk]

Well lets see if I can make my question next year much more intelligent then


The HMRC regulations state....

A report is not normally required where shares are transferred by an individual in the
normal course of domestic, family or personal relationships of the person transferring the
shares

hence why I was asking if an unmarried domestic partnership would count given the regulations don't mention anything about marriage/civil partnership.


thanks all for your responses. i'll now run for cover.

Keep your affairs separate IMO. We have at least one poster on here that is still trying to deal with one of the directors taking 18k out of the business and refusing to give it back... oh hang on.. you were already advised to do that...

Anyway, your accountant will clear your question up for you.

[Old Greg]

Another one who will learn the hard way.

That's rather optimistic of you, SueEllen.