What's wrong with this structure?

[Wanderer]

I know, but is this structure legal?

Difficult question. If A and B were married then it would be OK. Otherwise, you have to carefully consider the implications of "income shifting" and "Settlements". You probably need to get professional advice. Even then, some accountants are risk averse and will advise you not to do this.

My take is that you would need to take legal advice and get a proper structure to the company with employment contracts etc on top of the accountancy advice.

As others have said, it's really messy and has the potential to go spectactularly wrong should A and B break up, stop working, get pregnant or HMRC decide to investigate and find something they don't like the smell of...

[Clare@InTouch]

Actually, thinking about this... Would the structure fall foul of MSC regs? If not why?

No.


To be an MSC Provider a person must be carrying on a business of promoting or facilitating the use of companies to provide the services of individuals.

Meaning of “promotion”
In this context promotion does not mean a person who promotes their business (whatever that business might be), rather it means the promotion of a certain type of product, namely companies to provide the services of individuals. Promotion takes its general usage meaning and includes, amongst other things, such activities as marketing, encouraging, initiating, etc

Meaning of “facilitation”
In this context facilitation takes its ordinary meaning: amongst other things, helping, making easier, enabling etc.

Who is and who is not an MSC Provider
The legislation provides a specific exemption for persons being MSC Providers (involved with a company) merely by virtue of providing legal or accountant services in a professional capacity. This specific exemption applies only to persons professionally qualified (or training for a professional qualification) regulated by a regulatory body.

But simply because a person is not exempt merely by virtue of providing legal or accountancy services in a professional capacity, does not mean that they are an MSC Provider. Persons who promote or facilitate companies generally, as opposed to companies specifically to provide the services of individuals, are not MSC Providers.

The Financial Secretary to the Treasury, John Healey, said in Parliament on 15 May 2007: “The first element that must be satisfied is that a person is carrying on a business of promoting or facilitating companies to provide the services of individuals, not a business to promote or facilitate companies generally. For that reason, those promoting or facilitating companies generally—for example, company formation agents—are not MSC providers. The same would be true of training providers and a number of companies that may provide advice.”

An accountancy/tax adviser, whether or not professionally qualified, who provides advice to clients who are service companies is not an MSC Provider merely by virtue of their client base. The test is whether a person is carrying on a business (or a discernable part of their business) of promoting or facilitating the use of companies to provide the services of individuals.

http://www.hmrc.gov.uk/employment-st...nce-july07.pdf

[liquidmoney]

Actually, thinking about this... Would the structure fall foul of MSC regs? If not why?

[northernladuk]

All,

Boyfriend (A) and girlfriend (B).

Bad idea at this point alone!!! Money and relationships at this level (I assume that you are not talking hub/wife that you haven't been together a very long time)

I am sure there are many people that will say they have been working this way for years and it is fine. I am sure plenty more will crop up and tell us how it all fell apart very badly when the relationship did. I can think of one example of the top of my head from here.

You guys arn't on that bad money, why not reduce the risk and do your own thing until you are rock solid in your own futures let alone your combined companies.

Ok pedantic view but after being stung in 'secure' relationships I err on the side of keeping it separate.

[Stag Cozier]

Understand the risks associated with that. But what is the legal position with respect to structure? Anything wrong with it?

To answer your question directly, no there is nothing legally wrong with the structure. Go ahead and set it up. However, listen to the rest of the posters about implications you should consider. All fine and well if the relationship is rosy now but what if's need to be asked and sorted out right from the start.

[liquidmoney]

Take a look at this thread

http://forums.contractoruk.com/accou...-bad-idea.html

Okay, that's a slightly different scenario where both partners are shareholders. In my case only one is. Seems like there's nothing wrong with it in principle.

[cojak]

Take a look at this thread

http://forums.contractoruk.com/accou...-bad-idea.html

[DaveB]

Work dries up for A but legally he still needs to be paid the salary or be made redundant

A and B split up. B fires A as an employee. A sues for wrongfull dismissal.

Lots and lots and lots of reasons not to go into partnership with your other half in this way. Keep business and personal life a seperate as possible or you are asking for trouble in the future.

[liquidmoney]

B does: a bunk/ the plumber/ the horses. A is left with: unpaid salary/ taxes/ the tab.

You need to consider more than the legal side of things in that situation...

Understand the risks associated with that. But what is the legal position with respect to structure? Anything wrong with it?

[cojak]

B does: a bunk/ the plumber/ the horses. A is left with: unpaid salary/ taxes/ the tab.

You need to consider more than the legal side of things in that situation...

[liquidmoney]

All,

Boyfriend (A) and girlfriend (B). B forms a new limited company, and is the sole director and shareholder. B is a fee earner, but at a low level. B employs A and pays him a reasonable salary (say 40k) through PAYE. A earns significantly more, income based on regular (outside IR35) IT contracts. B pays herself a reasonable salary (say £25k) also and takes dividends infrequently. Annual turnover would be in the region of £140k. What's left is retained profits.

Not the most tax efficient I know, but is this structure legal?

Thanks,

L