Ltd company, secretary's salary

[Wanderer]

So far i am the whole and sole share holder of the company. So you recommend me to make my wife as shareholder?. Is it ok to make my wife as shareholder in the middle of Financial Year?. When I spoke to my accountant he says that it is not good prictice of issuing new shares, HMRC may consider this as incomeshifting, He told me to open a new company to divide the shares. But few other friends says that it is not a big matter in doing this. I am bit confused. Please advise.

Ahh, no one really knows to be honest. I get sick of hearing about what HMRC "don't like". It's irrelevant what they like or don't like, the law is supposed to be the law and it should be clear but unfortunately it's not.

Have a read of this link and see if that clarifies things at at all.

I would be inclined to issue your wife ordinary shares and be done with it. The shares have a nominal value (typically 1 pound each) but she doesn't have to pay this, she can owe it to your LTD. If you want to take greater dividends that her then you need to issue yourself more shares than she has, perhaps 60/40 or whatever or ask your accountant about creating different classes of shares.

[Goodmans]

So far i am the whole and sole share holder of the company. So you recommend me to make my wife as shareholder?. Is it ok to make my wife as shareholder in the middle of Financial Year?. When I spoke to my accountant he says that it is not good prictice of issuing new shares, HMRC may consider this as incomeshifting, He told me to open a new company to divide the shares. But few other friends says that it is not a big matter in doing this. I am bit confused. Please advise.

What I am thinking is devide 1 share into 10 shares and issue 4 shares to my wife and I keep 6 shares to my self.

Thanks guys. its been a super help from you guys.

Regards
G

[SueEllen]

Let's not forget that this legislation was a draft that never became law.

And with a Tory-based government in it's not likely to.

[Wanderer]

According to CUKs article on income tax shifting:

Under the legislation, taxpayers must detail how much income they have ‘foregone’ by making a comparison with how the business would have operated, had all their work been done independently on a fully commercial basis.

Let's not forget that this legislation was a draft that never became law.

[d000hg]

True, but you can make ANYONE a shareholder in your LTD company and pay them dividends. They don't have to actually do any work for the company.

You can, but then they own a chunk of your company and you have to pay them dividends whenever you take them yourself, AFAIK... so it's a fairly inflexible system?

Paying a salary is another issue, if you pay a connected person a salary then they should be doing some work for the company. Perhaps your company needs a trusted person to do the admin (including accessing online banking) which you simply couldn't trust to someone else.

Absolutely, paying for genuine work should be a non-issue.

[xoggoth]

If you can show that the wife has done genuine work done at roughly what it would cost elsewhere would it be a problem? According to CUKs article on income tax shifting:

Under the legislation, taxpayers must detail how much income they have ‘foregone’ by making a comparison with how the business would have operated, had all their work been done independently on a fully commercial basis.

One assumes that payment for doing a small website is not that much anyway.

[Wanderer]

The idea of it is that a 1-man company can frequently, in reality, suck in a huge amount of both husband's and wife's time. But a 1-man IT consultancy company doesn't really fit this pattern; it's not like my wife is packing and posting all the stuff I sell on eBay or helping me write quotes as a builder.

True, but you can make ANYONE a shareholder in your LTD company and pay them dividends. They don't have to actually do any work for the company.

Paying a salary is another issue, if you pay a connected person a salary then they should be doing some work for the company. Perhaps your company needs a trusted person to do the admin (including accessing online banking) which you simply couldn't trust to someone else.

What individuals actually do depends on how much of the FUD spread by HMRC they swallow...

[d000hg]

There might be no shred of legal evidence to support me in this, but I find the income splitting/shifting to your partner makes me rather nervous. The idea of it is that a 1-man company can frequently, in reality, suck in a huge amount of both husband's and wife's time. But a 1-man IT consultancy company doesn't really fit this pattern; it's not like my wife is packing and posting all the stuff I sell on eBay or helping me write quotes as a builder.
So it's a case we're within the letter but not the spirit of the rules and HMRC seem fairly happy to attack people who in their eyes "know they're exploiting a loophole".

Just my £0.02, to reiterate it's personal opinion only.

[Wanderer]

I am the whole and sole share holder of the LTD Company.
My wife is working as Secretary to the company and I am paying her the minimum salary.
Now I am thinking of asking her to build a web-site for my company and for that I want to pay her some more.

If you start paying her more salary then your LTD will be hit with a bill for Employers National Insurance and she will have to pay PAYE and NI.

Presuming you are pushing the higher rate tax and your wife doesn't earn a substantial income already, why don't you just treat the company as a family business, give your wife equal shares in your company and do a dividend split with her.

I'm sure that some people will give you a line about S660, settlements and income splitting and they are going to crack down on this (like they have been saying for the last 5 years). Get some professional advice from your accountant on how to restructure the company and go with the income splitting route which is what everyone else has been doing for donkeys years.

[d000hg]

You say you already pay her "the minimum salary". What do you mean by this? I thought it was not wise to pay a salary to someone who holds a title unless they actually do some work... e.g MPs paying their family to be a "researcher".

[SueEllen]

She may actually do some proper work as a secretary.

I've met 2 contractors whose other half's have been their secretarial service simply because they had more than one contract at a time i.e. they were actually running a proper small business.

[RichardCranium]

Have a read about 'income shifting' and 'Section 660'.

With the recent creation of the new Office of Tax Simplification, Section 660 could now be back in the spotlight as part of the Small Business Tax Simplification Review," Cottrell said. "Contractors who have entered into such arrangements should remain vigilant."

[ChimpMaster]

Why pay her a salary? You'll have to pay Employer's NI on it won't you, and go through all the employer hassle.

It might be preferable to just pay her as a consultant for the job at hand, say £5k which she can declare on her SA (I wouldn't know how though!)

[Clare@InTouch]

I can't comment on the techi side, but as far as salary goes HMRC won't mind at all if you pay her extra for doing more work - you'll be paying tax and NI on it in full so it's not as if you're gaining any tax advanatge over employing a third party to do the work.

[Goodmans]

Dear Contractors,

I am a self-employed contractor through My Own LTD Company. I am the whole and sole share holder of the LTD Company.
My wife is working as Secretary to the company and I am paying her the minimum salary.

Now I am thinking of asking her to build a web-site for my company and for that I want to pay her some more. She is well qualified to do this job.

Can you please give me any suggestions?
Will there be any problems with HMRC.
How much do you think it will cost for this job?

I want to build a site on the content I am experienced. I will help her collecting the information and she will also involve in collecting the information on the subject and build the web-site and maintain it and adding new topics etc.

Regards
G