gifting shares to wife from an already established company

[thecontractoruk]

Dear fellow contractors,
I would like to know your opinion on the same old question of gifting shares to wife. I hope I am not repeating the same question again here as my situation is slightly different and also I am not sure about any changes to latest hmrc rules on this.

Basically I started my ltd company few years back as 100% shareholder i.e 1 share with £1 value. Since then I am taking dividends no more than basic rate hence accumulated some balance in my company account.

Recently got married and now I am thinking to issue 99 more shares and gift 50 shares to my wife making 50:50 partnership. My wife have no other income.

After reading several threads here on this topic and research on Internet and arctic Systems ruling etc what I understand is, fee-earning contractor can gift shares and resulting dividend income to a non-fee-earning wife and HMRC cannot apply the settlements legislation if

1) The shares are ordinary shares and have same value
2) The shares are outright gift


However I am not sure if this only applies to gifting share at the time of company formation when the shares have nominal value ?

My Accountant advise is the main fee earner should earn more income from the company than wife so he recommends 60:40 split. But I am not sure if that is correct ?


looking forward to here your thoughts

[northernladuk]

I remember Simon Dolan popped on and said 60/40 or 70/30 to reflect fee earner but others said it made no difference.

Why is your situation different?

Many threads on wife as shareholder below

https://www.google.co.uk/search?q=gi...HVB8fsaJLXnMgF

Lots of threads from people asking about 60/40 splits below.

https://www.google.co.uk/search?q=gi...ntractoruk.com

Is she going to have no income in the medium term to long term? Changing your share structure too often isn't advisable.

Lots of stats on divorce levels to ponder bearing in mind someone now owns half your business cause I am a cheerful optimist.
http://www.marriagefoundation.org.uk...-%20060213.pdf

[thecontractoruk]

I remember Simon Dolan popped on and said 60/40 or 70/30 to reflect fee earner but others said it made no difference.

Why is your situation different?

Many threads on wife as shareholder below

https://www.google.co.uk/search?q=gi...HVB8fsaJLXnMgF

Lots of threads from people asking about 60/40 splits below.

https://www.google.co.uk/search?q=gi...ntractoruk.com

Is she going to have no income in the medium term to long term? Changing your share structure too often isn't advisable.

Lots of stats on divorce levels to ponder bearing in mind someone now owns half your business cause I am a cheerful optimist.
http://www.marriagefoundation.org.uk...-%20060213.pdf

Thanks NLUK, (and sorry for the slow reply ...)

I though my situation was different as I am gifting shares from an already established company but after going through the links you provided, I see the same question was already discussed. I must admit I miss some of these threads in my search.

In my opinion I don’t see how the 70:30 split will be justified with hmrc if 50:50 split is illegal ? Also I don’t see point in accountant advise that fee earner should hold more shares, as there is no guidelines etc like that. Ofcourse I wil clarify that with him.

My wife is not going to work any where else in long run other than helping me with running company and divorce is out of question

[northernladuk]

Thanks NLUK, (and sorry for the slow reply ...)

I though my situation was different as I am gifting shares from an already established company but after going through the links you provided, I see the same question was already discussed. I must admit I miss some of these threads in my search.

In my opinion I don’t see how the 70:30 split will be justified with hmrc if 50:50 split is illegal ? Also I don’t see point in accountant advise that fee earner should hold more shares, as there is no guidelines etc like that. Ofcourse I wil clarify that with him.

My wife is not going to work any where else in long run other than helping me with running company and divorce is out of question

Is just sort of an opinion/hunch really. I guess it's pretty unfounded but it does kinda lend itself to showing how the business is run so looks less like aggressive avoidance. It's like the argument about people should pay a little bit of tax on their wage just in case HMRC do a sweep of everyone paying under the threshold. No basis or case to demonstrate it, it's just an idea that you might be less of a target than if you pay some tax and none at all.

I seem to think that the reason this passed in the arctic case or just a good argument in general is that the wife supports the husband intangibly while he's making his wad so she should be allowed something from the company for the effort even though her input wasn't in to the company directly. If this is the case 50% seems a little high. She didn't put half the effort in, she support him so 70/30 or whatever seems fairer... Don't quote me on all that and anyway as you say there is no case law around it so whatever you feel comfortable with.

[WordIsBond]

In my opinion I don’t see how the 70:30 split will be justified with hmrc if 50:50 split is illegal ? Also I don’t see point in accountant advise that fee earner should hold more shares, as there is no guidelines etc like that. Ofcourse I wil clarify that with him.

You might click the link on the sidebar for S660 and read it all.

50:50 is completely legal for a spouse (NOT an unmarried partner, though). HMRC will not come after someone over a 50-50 split as the law stands right now. If the law changes, you may need to change your share split. For now, it is not an issue.

I'd say the 70:30 thing is probably less about legal or tax considerations, and more about concerns over divorce and control of the company if that happens. A 50-50 split is a nightmare if the two owners are fighting and can't agree on anything. You might just ask your accountant straight out if that is the reason he advised against 50-50. It's a little bit of a delicate thing for an accountant to ask -- "Is your marriage good enough to go 50-50 or not?" Not a conversation they really want to have, so to be safe I think some just advise 60-40 or 70-30 without explaining why.

The difference between 50-50 and 70-30 matters between £32-50K of income (at 70-30, with the new dividend tax, in that range you'll be paying tax on dividends that, if paid to your wife, would have been tax free). It also matters from about £60-85K (you'll have dividends in the higher rate band that would have been lower rate if paid to your wife, and if you have kids this might affect you on child benefit as well). It also can have impacts over £140K, but if you are doing that well you don't want advice from some guy on the Internet.

[SlipTheJab]

You might click the link on the sidebar for S660 and read it all.

50:50 is completely legal for a spouse (NOT an unmarried partner, though). HMRC will not come after someone over a 50-50 split as the law stands right now. If the law changes, you may need to change your share split. For now, it is not an issue.

I'd say the 70:30 thing is probably less about legal or tax considerations, and more about concerns over divorce and control of the company if that happens. A 50-50 split is a nightmare if the two owners are fighting and can't agree on anything. You might just ask your accountant straight out if that is the reason he advised against 50-50. It's a little bit of a delicate thing for an accountant to ask -- "Is your marriage good enough to go 50-50 or not?" Not a conversation they really want to have, so to be safe I think some just advise 60-40 or 70-30 without explaining why.

The difference between 50-50 and 70-30 matters between £32-50K of income (at 70-30, with the new dividend tax, in that range you'll be paying tax on dividends that, if paid to your wife, would have been tax free). It also matters from about £60-85K (you'll have dividends in the higher rate band that would have been lower rate if paid to your wife, and if you have kids this might affect you on child benefit as well). It also can have impacts over £140K, but if you are doing that well you don't want advice from some guy on the Internet.

In that case I should have gone for 99 - 1 in my favour

[CloudWalker]

If your wifes not working and you're giving her 50/50 of your shares she'll be less motavated to go out and make her own money

The shoes on my feet
I've bought it
The clothes I'm wearing
I've bought it
The rock I'm rockin'
'Cause I depend on me
If I wanted the watch you're wearin'
I'll buy it
The house I live in
I've bought it
The car I'm driving
I've bought it
I depend on me

[diseasex]

My friend had a wife which he loved veeeery much , and vice versa. But when things started to go wrong after few years she didn't hesistate and took his house, without paying penny on it.
Ladies can change mentality if necessary
Just a word of warning

[SlipTheJab]

My friend had a wife which he loved veeeery much , and vice versa. But when things started to go wrong after few years she didn't hesistate and took his house, without paying penny on it.
Ladies can change mentality if necessary
Just a word of warning

How is your wife now?

[diseasex]

How is your wife now?

Just my friend , i live in partnership and would never think of giving her half of my assets