LTD Company reorganization

[aj1977]

Ok...I operate through my own LTD company.Until 13/11/2007 my company had myself as the company director and company secretary and my friend as the other director,with me holding 100% of the shares.
Since 13/11/2007 my friend has resigned from my company directorship and I wanted to appoint my wife as one of the director of my company and sent the relevant forms to companies house but they have still not done it.They say they have not received any forms yet..anyway here are my doubts..


1) Can a company exist with just one person in the capacity of both director and secretary??
2) Can I appoint my wife as another director to my company so that I can start paying her salary and dividends(after allocating her 50% of shares??).My accountant says not to do this as there is an legislation comes into effect from april 2008 which forbids allocating shares to a close family member
3) If option2 is not feasible then is it possible to treat my wife as one of my employee for my company (she is an IT consultant as well, but does'nt work now due to child birth).If yes can I pay her back dated salaries(the NMW) so that I can reduce my company's tax burden?

[malvolio]

Ok...I operate through my own LTD company.Until 13/11/2007 my company had myself as the company director and company secretary and my friend as the other director,with me holding 100% of the shares.
Since 13/11/2007 my friend has resigned from my company directorship and I wanted to appoint my wife as one of the director of my company and sent the relevant forms to companies house but they have still not done it.They say they have not received any forms yet..anyway here are my doubts..


1) Can a company exist with just one person in the capacity of both director and secretary??
2) Can I appoint my wife as another director to my company so that I can start paying her salary and dividends(after allocating her 50% of shares??).My accountant says not to do this as there is an legislation comes into effect from april 2008 which forbids allocating shares to a close family member
3) If option2 is not feasible then is it possible to treat my wife as one of my employee for my company (she is an IT consultant as well, but does'nt work now due to child birth).If yes can I pay her back dated salaries(the NMW) so that I can reduce my company's tax burden?

You really haven't been paying attention, have you. Ever hear of Arctic Systems or Income Shifting? Anyway, two things to bear in mind:

There will be legislation in the next budget to stop you transferring income to your other half in order to save tax. It's wrong, vindicitive, unjustifiable and against the whole idea of separate taxation, but then that's what this governemnt does best. So it will happen and the best way to avoid getting investigated is to own all your own shares and cough up the extra tax. Listen to your accountant.

By the same token, take her on as an employee (dubious at best anyway) and she would still be a connected person and taking income out of proportion to her contribution to the company (in Hector's eyes, that is, not in reality, but reality doesn't count). So it still wouldn't work.

The other thing is that small companies don't need CoSecs after April this year, so you could appoint 'er indoors for the duration to keep things legal until then. The role doesn't need to be a paid one.

[aj1977]

You really haven't been paying attention, have you. Ever hear of Arctic Systems or Income Shifting? Anyway, two things to bear in mind:

There will be legislation in the next budget to stop you transferring income to your other half in order to save tax. It's wrong, vindicitive, unjustifiable and against the whole idea of separate taxation, but then that's what this governemnt does best. So it will happen and the best way to avoid getting investigated is to own all your own shares and cough up the extra tax. Listen to your accountant.

By the same token, take her on as an employee (dubious at best anyway) and she would still be a connected person and taking income out of proportion to her contribution to the company (in Hector's eyes, that is, not in reality, but reality doesn't count). So it still wouldn't work.

The other thing is that small companies don't need CoSecs after April this year, so you could appoint 'er indoors for the duration to keep things legal until then. The role doesn't need to be a paid one.

Thanks ...So I can still have my company with one director(myself) is it?...

[SueEllen]

Thanks ...So I can still have my company with one director(myself) is it?...

YES

I have one director (me) and a company secretary who I'm gonna sack come April.

[aj1977]

YES

Thanks

[aj1977]

You really haven't been paying attention, have you. Ever hear of Arctic Systems or Income Shifting? Anyway, two things to bear in mind:

There will be legislation in the next budget to stop you transferring income to your other half in order to save tax. It's wrong, vindicitive, unjustifiable and against the whole idea of separate taxation, but then that's what this governemnt does best. So it will happen and the best way to avoid getting investigated is to own all your own shares and cough up the extra tax. Listen to your accountant.

By the same token, take her on as an employee (dubious at best anyway) and she would still be a connected person and taking income out of proportion to her contribution to the company (in Hector's eyes, that is, not in reality, but reality doesn't count). So it still wouldn't work.

The other thing is that small companies don't need CoSecs after April this year, so you could appoint 'er indoors for the duration to keep things legal until then. The role doesn't need to be a paid one.

So how do u guys manage to keep the tax down? ...Pension contributions???

[XLMonkey]

3) If option2 is not feasible then is it possible to treat my wife as one of my employee for my company (she is an IT consultant as well, but does'nt work now due to child birth).If yes can I pay her back dated salaries(the NMW) so that I can reduce my company's tax burden?

Although the other posters are right about the impact of the new legislation on income shifting, you need to bear in mind that the changes are designed to catch people who transfer shares or other income generating assets to their spouse, rather than people who take a salary.

I think that you can legitimately take on your wife as an employee (say, to carry out adminstration of the company and other secretarial duties that are non fee-earning) and pay a relatively low salary to her. National Minimum Wage or thereabouts would seem reasonable, provided that her responsibilities were properly documented in advance.

You can backdate the salary within the tax year, but again you would need to document the reasons (along with at least some evidence that she was involved in the company from the point where you started paying her).

However, you will need to look at this carefully (i.e. ask your accountant), as it does depend on her situation (i.e. was she employed before taking maternity leave, is she getting statutory maternity pay, has she got other sources of income).

[XLMonkey]

So how do u guys manage to keep the tax down? ...Pension contributions???

in no particular order
- ask my accountant for advice. This is always a good start.
- home office as declared place of work = travel to and from client is reclaimable (provided that you are not caught by the HMRC rules on declared place of work)
- company party(ies) to the value of 150/head/annum tax free
- mobile phone in company name = no tax to pay
- building up cash in the company (i.e. not paying yourself everything that the company earns), so that you can smooth out the amount of tax you pay from year to year.
- pension contributions (though its by no means certain whether you will actually reduce the amount of tax you pay in the end)
- office equipment (laptops, printers, monitors, associated techno-gadgets) are generally bought by the company
- flat rate VAT scheme makes you c. 2% more profit for the same turnover (not strictly a tax planning issue, but certainly a good tip to ensure that you get more in the door to begin with)

[r0bly0ns]

You say your other half is an IT professional that is currently not working.

Could she do some work for you (even part time) to justify the share ownership? Proof reading documents, a bit of admin, making phone calls...

The legislation is only to prevent people from gifting shares when there is no reason to do it other than to save tax. If your wife legitimately does some work for the business, then she can legitimately own some shares.


Howver, I am not a lawyer or an accountant..... .

[aj1977]

You say your other half is an IT professional that is currently not working.

Could she do some work for you (even part time) to justify the share ownership? Proof reading documents, a bit of admin, making phone calls...

The legislation is only to prevent people from gifting shares when there is no reason to do it other than to save tax. If your wife legitimately does some work for the business, then she can legitimately own some shares.


Howver, I am not a lawyer or an accountant..... .

Cheers Guys..very useful indeed