Reply to: Using my wife's contracting company

[northernladuk]

Thanks, all interesting points. It's definitely a case of circumstances dictating at the moment. Without Covid my umbrella contract was set to run for years, hence the closure of the Ltd. Had no desire or need to return to Ltd ways.

But you don't know that. Closing the company certainly wasn't the best decision and you are stuck with it now I am afraid. If it helps you most certainly won't be the only one. It's going to be the hot topic on here for the next few years judging by the number of 'MVL my company' posts we've had since before the April changes that weren't changes. We are getting them even now and on every one we point out that this could happen.

The lead on the outside IR35 job seemed legit so it's obviously something I don't want to miss out on. I wouldn't look to take any dividends at all from the wife's account to me personally, to be honest I wouldn't even need to take a small salary, as long as the money is technically coming in to 'the house' as it were.

Which is exactly why it's aggressive avoidance and won't stand up to any scrutiny.

Not sure if Ltd for 10 years - Umbrella March '20 to September - September to November unemployed is a valid reason to start a new company?

No it isn't. It looks like you've gained a tax advantage, taken a break and come back for more of the same. People have been doing exactly this hence the change in legislation.

I mean it definitely comes under TAAR using the wording, however I imagine proving anti-avoidance over enforced avoidance is the difficult one.

So you know you shouldn't do it but you think you migth because you'll get away with it? It's not difficult IMO. When they get you you'll be royally screwed and it won't be difficult to spot you. Just depends how lucky you feel I guess.

Assume it's too soon at the moment that there are any Covid related exceptions to the rule.

Nope and there won't be IMO. Infact.. the only difference might be, with a massive and ever widing hole in the coffers HMRC will start clawing the money back somewhere so why not start with people that they think owe tax? If we thought they would be on the ball at the IR35 change I can't imagine how hard they are going to come after it in April when it does hit. Gov skint, free money sitting there. Just guessing but that's what I'd do if I had no money.

[eek]

Not sure if Ltd for 10 years - Umbrella March '20 to September - September to November unemployed is a valid reason to start a new company?



I mean it definitely comes under TAAR using the wording, however I imagine proving anti-avoidance over enforced avoidance is the difficult one.

Assume it's too soon at the moment that there are any Covid related exceptions to the rule.

I think you would have a better chance arguing unemployed after a failed attempt to go permanent led to starting again then using your wife’s company.

put it this way - i would not be using my wife’s company in your circumstances - I would be explicitly starting again or using an umbrella - using your wife’s company is just too tempting for HMRC to create a test case with

[mikedarv]

+1 - I personally think it would be safer to either (attempt to) create a new company if you get the contract rather than using your wife's company or just continuing to work via an umbrella company.

After all you can provide a valid reason for starting your business again - I went permanent and the work dried up so had no choice but to start again.

Using your wife's pre-existing company would allow HMRC to open up a whole heap of questions that I suspect you would have great difficulty answering in ways that both of the other options outlined above would avoid.

Not sure if Ltd for 10 years - Umbrella March '20 to September - September to November unemployed is a valid reason to start a new company?

^^ And this is where I think you should be careful. You may fall foul of the TAAR for MVL/ER as a beneficiary of the income from this work. I don't know for sure, but I would recommend that you take professional advice on this point before deciding what to do.

-- Edit ---

Of course, the risk is only as much as the money taken out of the company during the MVL; could be substantial, could FA.

I mean it definitely comes under TAAR using the wording, however I imagine proving anti-avoidance over enforced avoidance is the difficult one.

Assume it's too soon at the moment that there are any Covid related exceptions to the rule.

[eek]

^^ And this is where I think you should be careful. You may fall foul of the TAAR for MVL/ER as a beneficiary of the income from this work. I don't know for sure, but I would recommend that you take professional advice on this point before deciding what to do.

+1 - I personally think it would be safer to either (attempt to) create a new company if you get the contract rather than using your wife's company or just continuing to work via an umbrella company.

After all you can provide a valid reason for starting your business again - I went permanent and the work dried up so had no choice but to start again.

Using your wife's pre-existing company would allow HMRC to open up a whole heap of questions that I suspect you would have great difficulty answering in ways that both of the other options outlined above would avoid.

[wattaj]

...The lead on the outside IR35 job seemed legit so it's obviously something I don't want to miss out on. I wouldn't look to take any dividends at all from the wife's account to me personally, to be honest I wouldn't even need to take a small salary, as long as the money is technically coming in to 'the house' as it were.

^^ And this is where I think you should be careful. You may fall foul of the TAAR for MVL/ER as a beneficiary of the income from this work. I don't know for sure, but I would recommend that you take professional advice on this point before deciding what to do.

-- Edit ---

Of course, the risk is only as much as the money taken out of the company during the MVL; could be substantial, could FA.

[malvolio]

You have failed to address my central point: how is what you suggest above, and out of the reach of, TAAR?

You do this ALL the bloody time. Stop trying to be correct on a technicality and show where I am wrong. You have not done so and you are misleading the poster with your "advice".

The MVL is not all that relevant - IMVHO of course - since the OP can demonstrate a good reason for closing the original company and a good reason for wanting to work through a Ltd Co once more. It would be very hard to demonstrate that their actions are in scope of TAAR: the well known test of reasonableness would surely apply. And since he is willing to forego an income and dividends, it would be hard to prove any intent to defraud HMRC.

It will be interesting to see how his accountant advises as to the best way forward...

[mikedarv]

Thanks, all interesting points. It's definitely a case of circumstances dictating at the moment. Without Covid my umbrella contract was set to run for years, hence the closure of the Ltd. Had no desire or need to return to Ltd ways.

Probably applied for 300 odd perm/umbrella jobs recently and barely got a single response back, my network is pretty small so I'm getting lumped in with 1,000 other applicants.

The lead on the outside IR35 job seemed legit so it's obviously something I don't want to miss out on. I wouldn't look to take any dividends at all from the wife's account to me personally, to be honest I wouldn't even need to take a small salary, as long as the money is technically coming in to 'the house' as it were.

[eek]

I don't recall anything in the Arctic ruling that says man and wife cannot share in the proceeds of their joint limited company, especially if the shares are purchased rather than gifted (although that is a minor point anyway). It's not like the situation has arisen as a result of any kind of planned action, more a combination of circumstances and is defensible if it were challenged on that basis.

Or, as the OP suggested, take a minimum salary as an employee and no shares or dividends. Not tax efficient, but let's make sure the tax tail is wagging the business dog. Then again, if the OP was not concerned about tax efficiency, he wouldn't be chasing outside IR35 work in the first place.

However if it is at all a concern, then simply start a new company in isolation, stay working through an umbrella, or go permanent.

The person asking the question MVLed his company and it's the MVL side of things that would be the issue nothing to do with anything else.

Did the Arctic case and judgment explicitly cover the MVLing of companies? As if not that is a hell of an option (with a big bonus pot) to play with....

[wattaj]

I don't recall anything in the Arctic ruling that says man and wife cannot share in the proceeds of their joint limited company, especially if the shares are purchased rather than gifted (although that is a minor point anyway). It's not like the situation has arisen as a result of any kind of planned action, more a combination of circumstances and is defensible if it were challenged on that basis.

Or, as the OP suggested, take a minimum salary as an employee and no shares or dividends. Not tax efficient, but let's make sure the tax tail is wagging the business dog. Then again, if the OP was not concerned about tax efficiency, he wouldn't be chasing outside IR35 work in the first place.

However if it is at all a concern, then simply start a new company in isolation, stay working through an umbrella, or go permanent.

You have failed to address my central point: how is what you suggest above, and out of the reach of, TAAR?

You do this ALL the bloody time. Stop trying to be correct on a technicality and show where I am wrong. You have not done so and you are misleading the poster with your "advice".

[malvolio]

I don't recall anything in the Arctic ruling that says man and wife cannot share in the proceeds of their joint limited company, especially if the shares are purchased rather than gifted (although that is a minor point anyway). It's not like the situation has arisen as a result of any kind of planned action, more a combination of circumstances and is defensible if it were challenged on that basis.

Or, as the OP suggested, take a minimum salary as an employee and no shares or dividends. Not tax efficient, but let's make sure the tax tail is wagging the business dog. Then again, if the OP was not concerned about tax efficiency, he wouldn't be chasing outside IR35 work in the first place.

However if it is at all a concern, then simply start a new company in isolation, stay working through an umbrella, or go permanent.

[wattaj]

You can share dividends without problems, so work out a shareholding , buy the shares off the company and update Companies House. If you want a salary, probably best to be a director, which is more flexible than being an employee and avoids stuff like NMW and pensions.

Don't let the accountant scare you over income shifting, it is not an issue.

I think that this is an oversimplification: you don't seem to consider the risk arising from the MVL of the earlier company. AIUI, this effectively bars one from being a beneficial owner in the same line of work as the earlier company.

Happy to be proved wrong of course.

[northernladuk]

Potentially in the same boat here soon. My Ltd was MVL'd in May, I have been Umbrella since then but got terminated early due to covid.

I have seen various outside IR35 roles recently so might be looking to use my wife's Ltd. Money wise absolutely no issue with it going into her account/dividend pot, basic salary to me is more than fine.

Waiting to hear back from the accountant as I'm not sure if it's worth signing up as a director or just as an employee?

But if goes in to her pot and she just takes over the spending it can be argued it still comes back to you so that is a very tenuous argument.

I see what Mal says but I can't see how this will pass any kind of investigation. You shut company, get tax advantage, contract through wifes company, she takes money and you continue to live same lifestyle.

Too easy and clearly avoids what the legislation attempts to fix.

[malvolio]

You can share dividends without problems, so work out a shareholding , buy the shares off the company and update Companies House. If you want a salary, probably best to be a director, which is more flexible than being an employee and avoids stuff like NMW and pensions.

Don't let the accountant scare you over income shifting, it is not an issue.

[mikedarv]

Potentially in the same boat here soon. My Ltd was MVL'd in May, I have been Umbrella since then but got terminated early due to covid.

I have seen various outside IR35 roles recently so might be looking to use my wife's Ltd. Money wise absolutely no issue with it going into her account/dividend pot, basic salary to me is more than fine.

Waiting to hear back from the accountant as I'm not sure if it's worth signing up as a director or just as an employee?

[Craig@Clarity]

It is fine for dividends to be shared between two people when only one is providing the revenue at any one point in time. Gifting shares should be possible, but if her company has significant funds, check whether this is strictly allowed.

I would advise that there are certain risks to income shifting doing this. Whole can of worms.

As other's have said, depends on contract length and value. Depending on your IR35 status, I'd say go brolly or start a new company and perhaps have your wife as a shareholder on there too depending on her personal income and tax position.