Reply to: Got Married - Add spouse ?

[TheCyclingProgrammer]

The accountant did mention about making her a secretary and it being beneficial when the company closes down, though I havent asked how.

Being a company officer would be beneficial if she was also a shareholder as she would then potentially be eligible for entrepreneurs relief on any capital distribution (e.g. 25% of whatever profit is left in the company). Quite a tax saving, assuming the government doesn't find a way of excluding us from this relief in the near future.

"If she is a director you could also pay her a nominal salary. Discuss this with your accountant"

I assume I also pay if she were a secretary?

You can pay anyone any salary you like. However there is a question over that salary's tax-deductibility (in terms of corporation tax relief) for YourCo if the salary is not "wholly and exclusively" for business purposes and where a salary is effectively something for nothing or grossly disproportionate HMRC May consider this to be the case.

In practice most people think the legal responsibility of being a company director is sufficient to justify a basic salary. The same justification could arguably be made for a company secretary, especially if they are having some kind of role in the company (e.g. basic admin, handling contracts, doing books etc.). Opinion on what is reasonable varies. Some will say up to the full tax allowance (£11k) is fine. Some prefer to be more cautious (my wife currently gets a nominal salary of £2.4k a year for being Co. Sec. and basic admin though I'm considering making her a director and upping this a bit).

This is why I recommended you speak to your accountant about this.

So does splitting the shares 75-25 or making her a secretary or both have any tax benefits, if yes what specifically?

Meanwhile I will read up more on s624.

Thank you

See above but the two things are only loosely linked in terms of eligibility to ER. Beyond that, splitting the shares allows her to receive dividends (and make use of both the £5k dividend allowance and any unused personal tax allowance) and paying a nominal salary if she's a company officer also allows you to make use of some of her tax allowance whilst reducing your company corporation tax bill.

The best general overview of s624 is, IMO, this one:
https://www.taxation.co.uk/Articles/.../324521/me-you

[TheCyclingProgrammer]

No, the accountant simply mentioned that HMRC recently have started attacking income shifting.

Unless there's something I, or anybody else here is unaware of, I think your accountant is a bit behind the times.

Barring a few tribunal cases regarding the use of dividend waivers over the last 5 years, HMRC and the government have shown no signs of attacking income shifting in a serious way since they lost the Arctic case. That was ten years ago. The Labour government made a bit of noise in light of that defeats about a new "Family business tax" which never emerged and since the coalition government came to power it was quietly dropped and nothing has been mentioned since.

This doesn't mean that HMRC couldn't use the settlements legislation to attack an easy target - its fairly easy for them to attack a gift of shares between spouses if they can show that the spouse exemption doesn't apply (e.g. because the shares only entitled the spouse to income or there were obvious arrangements for that income to be diverted back to them) but otherwise there's a chance they are setting themselves up for another Arctic.

We can and have had many discussions on here about the merits and risks of income shifting with e.g. other family members, unmarried partners etc. and whilst those scenarios are not as clear-cut as people think (there's a lot of misunderstanding about the legislation), its all hypothetical unless HMRC decide to start attacking it again. My opinion is that HMRC have neither the time nor resource to go down that road while there are easier and bigger targets but YMMV.

[konsultant]

Thank you ^^

[northernladuk]

Thank you SimonMac and others.

Without getting into divorces and marriages - what are the tax benefits of stock split or creating additional shares or paying a salary to your spouse?

I have read about you doing it, but would be useful to know the benefits.

Regards

Depends on the split and other situations. Your account should be able to create a tax planner for you that will show the best way for you and the numbers.

Or have a search for some sites that have comparisons

[konsultant]

Thank you SimonMac and others.

Without getting into divorces and marriages - what are the tax benefits of stock split or creating additional shares or paying a salary to your spouse?

I have read about you doing it, but would be useful to know the benefits.

Regards

[konsultant]

TLDR; yes you should, if it makes sense for your personal financial circumstances and you are aware of the implications.

One of the least risky forms of income splitting is to make your spouse a shareholder. What percentage you choose is up to you. Some do 50/50, my wife has 25%.

You need to consider her future employment and salary prospects too. No point paying her £30k dividends a year if a) she would pay higher rate tax on it anyway or b) your business isn't making enough profit.

As far as whether HMRC can attack it, there is a significant piece of case law known as the Artic systems case which established under what circumstances income splitting with a spouse could be caught by a piece of anti-avoidance legislation known as the settlements legislation (s624 formerly s660) and when it could not.

So long as you gift ordinary shares that rank equally with your shares and there's no dodgy arrangements to funnel any dividends directly back to you (e.g. by paying them into your account - her dividends are hers to do as she pleases with) or any conditions attached under which the shares must be returned to you) then this arrangement is safe from attack. I'm surprised your accountant didn't explain this to you.

You may want to consider making her a company officer too as this would make her eligible for entrepreneurs relief in the future if you ever close the company and take a capital distribution (under today's rules anyway). Doesn't have to be a director, company secretary will do. Director is probably easiest and the rules for two directors without employment contracts regarding pension auto enrolment are clear (you can opt out).

If she is a director you could also pay her a nominal salary. Discuss this with your accountant.

Thank you.

No, the accountant simply mentioned that HMRC recently have started attacking income shifting. But I know few friends who do this and wanted to get a wider view from everyone on the forum.

From your reply, I gather that this is a general practice with most contractors.
I understand the point regarding getting the dividends back by other means. I was looking at a 25% share to my wife.

The accountant did mention about making her a secretary and it being beneficial when the company closes down, though I havent asked how.

"If she is a director you could also pay her a nominal salary. Discuss this with your accountant"

I assume I also pay if she were a secretary?

So does splitting the shares 75-25 or making her a secretary or both have any tax benefits, if yes what specifically?

Meanwhile I will read up more on s624.

Thank you

[konsultant]

Good lawd what have I started

[northernladuk]

Indeed. Met my now wife of over 17 years when I was 20. Nearly 22 years later, we're happier than ever. I'm either doing something right, or something incredibly wrong.

You are just playing the numbers game my friend

[LondonManc]

True enough. I guess not everyone is as idealistic as you and I though (or our shepherd friend) eh?

Indeed. Met my now wife of over 17 years when I was 20. Nearly 22 years later, we're happier than ever. I'm either doing something right, or something incredibly wrong.

[barrydidit]

Up to them I suppose. If money is the main thing about the marriage, I don't see it as anything more than a legal agreement.

True enough. I guess not everyone is as idealistic as you and I though (or our shepherd friend) eh?

[LondonManc]

Maybe not, but some only plan on outlasting their other half.

Rich hermit's will cutting off his widow from inheritance is 'genuine' in final twist in drama between Alpine shepherd and Parisian

Up to them I suppose. If money is the main thing about the marriage, I don't see it as anything more than a legal agreement.

[barrydidit]

nobody ever enters marriage intending on it being short term, surely

Maybe not, but some only plan on outlasting their other half.

Rich hermit's will cutting off his widow from inheritance is 'genuine' in final twist in drama between Alpine shepherd and Parisian

[Lost It]

There's a lot af negativity out there about being married.

I wouldn't marry twice, if it didn't work the first time I'd take that as a sign.

Saying that I've been married to the same woman for 36 years now. Well. Maybe she's not the same in mind or body. But I'm pretty sure that if I hadn't spent so much of my life working away it wouldn't have lasted, it was like going home to a different woman every month at one bit.

I don't quite understand why there's a rush to get married if you expect it to fail though. It's not as if there's tax advantages (there was back in 1980). But I've never thought about making her a partner in my company. Maybe I should.

[LondonManc]

If she's currently working, it's probably worth it. If she's not, it won't be.

If she's not working, appoint her as your company secretary, get her to fill all the admin stuff in - spreadsheets for expenses, etc., clean the company office and so on.

See your accountant for full details on how and why.

If the worst happens and you split in a few years (nobody ever enters marriage intending on it being short term, surely), you can dissolve the company and open a new one with just you as shareholder.

[northernladuk]

Anyone know anything about prenups under European law UK, Spain and Portugal ? I heard that if you have kids they are as good as null and void or at least easily contestable. Hollywood celebs usually have watertight prenups I think but that's a legal system far, far away and probably extremely costly.

Are prenuptial agreements legally binding in the UK?

http://www.bljsolicitors.co.uk/news/...nts-in-the-uk/

Doesn't cover Wales due to the added complexity you are probably related as well.