Getting money out of Ltd co I'm leaving

[TheFaQQer]

In theory we have one share each

If the share ownership is only theoretical, what is the actuality?

I can take more out in dividend but maybe a buy-out with CGT/entrepreneurs relief would be a better or valid option (accountant to clarify). If I took it all out as divi it would amount to about £80k so rather a large sum.

If you take it out as a dividend, then you would need to pay your partner the same dividend. Even if they waive their right to the dividend, you would still need to have reserves which would allow that dividend to be paid out, so that wouldn't help at all - you'd need £160k and still only take £80k yourself.

[achillea]

Well I suppose we could pretend to have a falling out if it will save money!

[northernladuk]

It just beggars belief that people bugger about with sums as large as this and can't be arsed to spend £1500 a year to get a professional to help them.

[achillea]

If the share ownership is only theoretical, what is the actuality?


If you take it out as a dividend, then you would need to pay your partner the same dividend. Even if they waive their right to the dividend, you would still need to have reserves which would allow that dividend to be paid out, so that wouldn't help at all - you'd need £160k and still only take £80k yourself.

What I mean is that although we have one share each, the amount we take in dividend is never split 50/50 that is because we take out dividend based on what each of us has earned. In recent years I am the only one who has been taking a divi as most of the earnings are mine.

The complexities of this arrangement (and keeping tabs on who has what) are one of the many reasons why I want to go it alone and keep it all simple..... you should try explaining all of this to the bank when you are trying to re-mortgage...

[eek]

What I mean is that although we have one share each, the amount we take in dividend is never split 50/50 that is because we take out dividend based on what each of us has earned. In recent years I am the only one who has been taking a divi as most of the earnings are mine.

The complexities of this arrangement (and keeping tabs on who has what) are one of the many reasons why I want to go it alone and keep it all simple..... you should try explaining all of this to the bank when you are trying to re-mortgage...

You seriously need an accountant. If HMRC got wind of your dividend methods they would have a field day...

[JRCT]

What I mean is that although we have one share each, the amount we take in dividend is never split 50/50 that is because we take out dividend based on what each of us has earned. In recent years I am the only one who has been taking a divi as most of the earnings are mine.

The complexities of this arrangement (and keeping tabs on who has what) are one of the many reasons why I want to go it alone and keep it all simple..... you should try explaining all of this to the bank when you are trying to re-mortgage...

I presume you don't really mean what you've just said. Dividends are based on shareholding, not physical effort. If you have a 50/50 shareholding, then dividends should reflect that.

If you've done more work than your partner, then what you 'earn' is salary.

"A dividend is allocated as a fixed amount per share, with shareholders receiving a dividend in proportion to their shareholding."

[TheFaQQer]

What I mean is that although we have one share each, the amount we take in dividend is never split 50/50 that is because we take out dividend based on what each of us has earned.

How does that work - the law requires that a dividend is paid out in proportion to the shareholding. Do you declare the dividend and then one of you waives their right to the money each time?

Dividend waivers only work when there are enough distributable reserves in the company to cover the whole dividend amount before the waiver (see Buck v R & C Commrs and also Donovan & McLaren v HMRC), but I'm sure your accountant has checked that the paperwork has been done correctly.

[TheFaQQer]

It just beggars belief that people bugger about with sums as large as this and can't be arsed to spend £1500 a year to get a professional to help them.

This.

£80k in distributable reserves, £30k pension, plus whatever else is left lying around, and no accountant to advise on how best to sort the situation out??

[TykeMerc]

You seriously need an accountant. If HMRC got wind of your dividend methods they would have a field day...

No kidding, dividend waivers as a one off is a risk, as a regular thing just looks like what it is, manipulation. Dividends are paid in equal proportions to share holders on a per share basis, there are rules governing this stuff.

You really, really need professional advice and a good measure of luck, if HMRC don't start poking about in your business, they could get very unpleasant with what you've been doing.

[achillea]

This.

£80k in distributable reserves, £30k pension, plus whatever else is left lying around, and no accountant to advise on how best to sort the situation out??

I do have an accountant (and they are not cheap)... although clearly not a very good one. We have been operating like this for 10 years and they have never raised it as an issue... we did discuss this method when we set up and they said it was fine!

I have appointed a new accountant for the new company who seems to be more savvy and I'm waiting for them to get back to me. You have now got me very worried about past dividend payments... I did not know that this was not allowed.