Shares

[psychocandy]

It has been argued hard that a 50/50 split with a spouse that does little or nothing for the company can be seen as income splitting. IMO (and it seems to vary between the accountants) you want to be looking at a 70/30 split to make it look better.

Now of course this share split thing is a very contentious issue isnt it?

[SueEllen]

Don't give him the code until the letter you receive has his name/address on it. I mean, seriously...

I was trying to be polite and not tell him to run for the hills

Sorry change accountants immediately.

Loads of accountants post on here so if they piss you off you can slag them on here.

[Greg@CapitalCity]

I just have a couple of suggestions;

I thought my wife would need a share in order for her to receive dividends, my accountant says that when he does my tax return next march he will just tell them then that she has a share then, is this right?

Yes, that is right. Ask your accountant to prepare and file the appropriate paperwork immediately with Companies House. While income splitting is still OK, the HMRC view it as aggressive. If you have not properly recorded the share issue, and informed Companies House, I would expect the HMRC would pick a hole straight through your strategy.

I also have registered for Vat, I have just received the Vat agents authorization code for me to give my accountant, however it is not in his name or address, he says it is because he bought the business off someone else and has not have it transfered yet.

Don't give him the code until the letter you receive has his name/address on it. I mean, seriously...

[SueEllen]

I also have registered for Vat, I have just received the Vat agents authorization code for me to give my accountant, however it is not in his name or address, he says it is because he bought the business off someone else and has not have it transfered yet.

Pat

As the accountant hasn't set up things properly I wouldn't be giving him any VAT authorisation code as it's more stuff to get off him when you change to an accountant who actually understands how contractors work. (Doing a VAT return is easy and the people on the VAT helpline can help you fill your first one in if you don't understand the booklet.)

I suggest you ask your accountant questions based on what the guys that have already answered have said, and if your accountant doesn't give you a proper explanation that you understand then change accountants asap.

While the accountant acts for you it's you who will get in trouble not the accountant if s/he has done things wrong.

[Wanderer]

Is the accountant advocating tax fraud? Sounds like it.

Could be a directors loan and nearer the end of the tax year the accounts will be done, shares will be issued and dividends paid to distribute the profits and clear the directors loans. It does sound a bit close to the wind for my liking though.

Pat, if you are intending to do a dividend split then I think you should make your wife a shareholder immediately and declare the dividends properly with dividend vouchers etc. If you think you are paying her dividends now when she is not a shareholder then you are wrong and you will get a bill for thousands of pounds in tax if you get caught. Don't wait till the end of the year unless your accountant is absolutely adamant that they know what they are doing.

Also, you should take a salary of at least £7,000 in the personal tax year 6th April 2011 to 5th April 2012. If you only take £500 x 12 = £6,000 per year then the other £1,000 becomes company profit on which your company will have to pay corporation tax @20% losing £200 quid in tax for no reason. It's possible that your accountant would wrap all this up at the end of the year by paying you a bonus to use up the £7k limit but it's worth double checking.

[ASB]

No she only does my paperwork expenses invoices and takes calls etc.
I pay her only a little bit.
I pay myself £500 a month and then the rest is divided as a dividend between us.

If you don't have other earned income then that is inefficient. You should pay yourself enough to use your tax code since this is at 0% (about 7500 a year). Also at the level you are paying yourself you are probably below the threshold for it to count towards your state pension.

The divis you are paying your wife will in fact be your given she is not a shareholder. If you make here a shareholder you could fudge it in a number of ways. Your accountant seems quite happy to work around the issues. I expect there will miraculously be a predated stock transfer form lying around. Be funny if it overlapped with a different register of members though...

[northernladuk]

No she only does my paperwork expenses invoices and takes calls etc.
I pay her only a little bit.
I pay myself £500 a month and then the rest is divided as a dividend between us.

Ah that old cookie. HMRC will have never seen that one before Good for about £100 a month tops.

Well as said before she has no share so no dividend can be paid. If you are you are going to have to fudge your books. Not good at all.

It has been argued hard that a 50/50 split with a spouse that does little or nothing for the company can be seen as income splitting. IMO (and it seems to vary between the accountants) you want to be looking at a 70/30 split to make it look better.

I take it you are not billing for VAT at present then and intend to go on FRS?

[Pat1706]

How much are you paying your wife from the company and what does she do to earn this?

I presume you are not going to go for a 50/50 split between you?

Are you intending to build up a solid warchest as soon as you can for the invitable bench time which can be long at the moment or just pull everything out of the company you can straight away?

Is your accountant a contractor specialist or just a local guy. This bit about 'just telling them she has a share' doesn't sit right with me. If she does not have a share right now you should not be giving her a dividend. It just doesn't make sense and fudging your paperwork is not a good idea.

No she only does my paperwork expenses invoices and takes calls etc.
I pay her only a little bit.
I pay myself £500 a month and then the rest is divided as a dividend between us.

[Platypus]

This bit about 'just telling them she has a share' doesn't sit right with me. If she does not have a share right now you should not be giving her a dividend. It just doesn't make sense and fudging your paperwork is not a good idea.

Too right!

Is the accountant advocating tax fraud? Sounds like it.

[northernladuk]

How much are you paying your wife from the company and what does she do to earn this?

I presume you are not going to go for a 50/50 split between you?

Are you intending to build up a solid warchest as soon as you can for the invitable bench time which can be long at the moment or just pull everything out of the company you can straight away?

Is your accountant a contractor specialist or just a local guy. This bit about 'just telling them she has a share' doesn't sit right with me. If she does not have a share right now you should not be giving her a dividend. It just doesn't make sense and fudging your paperwork is not a good idea.

[Craig@Clarity]

In order to receive dividends, you or your wife must be a shareholder of the company so unless the shares are held jointly, all of the dividends should be declared as yours. If it was always the intention that your wife has a share in the company too, you can always allocate your wife a share through companies house. Your accountant should be able to do this for you online.

Can't really comment on the authorisation code but usually, it is in the accountant's name.

[Pat1706]

Hi

I am new to contracting and have a few basic questions which I hope some one can answer.

I set up my company in March, I paid an accountant to do it for me and I have 1 share.

I have received wages and dividends every month which i put aside 20% for tax and the rest is divided as a salary to my wife and to me and then what ever is left is paid half to my wife and half to me as a dividend.

I thought my wife would need a share in order for her to receive dividends, my accountant says that when he does my tax return next march he will just tell them then that she has a share then, is this right?

I also have registered for Vat, I have just received the Vat agents authorization code for me to give my accountant, however it is not in his name or address, he says it is because he bought the business off someone else and has not have it transfered yet.

Pat