New shareholder

[bzh]

Hi
Its the first year of my clients company, his accounting year ends in April. So far he is the sole share holder of the business. He wants to add his wife. So will the wife get pro rata dividends? or it will be assumed that the wife was share holder right from the first day and so will be given equal amount of dividends? How will HMRC know when did the wife become shareholder? Do we have to submit the exact month when she became or can we back date it?
Thanks

[Clare@InTouch]

You cannot backdate it, and it doesn't have retrospective effect. The wife will be entitled to dividends from the point at which she holds shares.

HMRC will know because she will inform them she needs to file a tax return, by calling them or sending form SA1. She'll then file a tax return each year. This is assuming of course that she NEEDS to file a return - there various criteria.

If she works for the company too your client may wish to add in a small salary, in order to keep her entitlement to state benefits etc.

Advice on tax efficiency can only be given if we knew all other personal income of both parties.

[TheCyclingProgrammer]

The shareholding will be effective from the date the shares are issued or transferred and are written into the company share ledger. Dividends can be issued from that point, as Claire says, subject to there being enough retained profit in the company.

It will become public knowledge when the next annual return is filed at companies house.

[DirtyDog]

If the company annual return has not been filed yet, then you could theoretically fiddle the paperwork so that it looks like it happened a while back.

Whether that is a course of action you want to take for your client is a very different matter - personally I wouldn't.

What does your client's accountant say?

[TheCyclingProgrammer]

If the company annual return has not been filed yet, then you could theoretically fiddle the paperwork so that it looks like it happened a while back.

Whether that is a course of action you want to take for your client is a very different matter - personally I wouldn't.

Also, no matter how far back you backdated the share allocation, any retrospective dividends would have to be shown as credited to a shareholders loan account too which would look very sus.

[DirtyDog]

Also, no matter how far back you backdated the share allocation, any retrospective dividends would have to be shown as credited to a shareholders loan account too which would look very sus.

You'll either have to fiddle a lot of paperwork to back date it, or realize that it's a bad idea to try.

What does your client's accountant say?

[TheCyclingProgrammer]

You'll either have to fiddle a lot of paperwork to back date it, or realize that it's a bad idea to try.

Sure, vouchers, minutes etc. However if OPs client was to simply backdate the share transfer/allocation to some point within the current company year but not pay any dividends, I'm not sure there's not a lot of evidence either way. It would be pointless though.