Reply to: Spouse as only Director

[Wanderer]

Aside from the part in bold, this is where I'm at now. You must be psychic .

a paper transaction will suffice.

Hmm, interesting to know. Thanks for sharing that!

[northernladuk]

Maybe the bloke is an undischarged bankrupt so can't be a director but wants to still be a contractor and use a LTD co. setup?

I think he has already explained his situation quite clearly.....

[convict]

Maybe the bloke is an undischarged bankrupt so can't be a director but wants to still be a contractor and use a LTD co. setup?

[ChimpMaster]

Why not take a huge director's loan. You will have to make damned sure you can either liquidate the company or pay this off before 9 months after the company tax year end otherwise you will will be hit with a s455 charge. You can also extend your company's tax year by 6 months which buys you some extra time.

Aside from the part in bold, this is where I'm at now. You must be psychic . I've just asked my accountant about the 6 month extension because this would be perfect for me, then I could wait until next summer before liquidating - s455 is the issue for me in my situation.

When you are ready for the MVL, the director's loan will be accounted for as a company asset and you will have to pay interest at the HMRC approved rate (about 4%). However, this interest is paid back to the shareholders as dividends (minus CT) so the net cost of the loan is 1% APR.

Not sure if the loan actually has to be physically paid back before the company closes or if it can be a paper transaction where it's accounted for and the balance of your company assets are distributed to you without money needing to change hands. Ask the people who do the MVL and see what they say...

Have asked this already and a paper transaction will suffice.

[TheFaQQer]

If there is no business justification for an odd set up they would be rubbing their hands in glee once they found it surely.

Whatever the legal outcome it just doesn't sound right as it doesn't reflect the actual business model.

Tell that to Philip Green.

[Wanderer]

These are my concerns too, but I'm in a situation where I to get the funds out and closing the current Ltd is most tax efficient way. The plan would be to close my current Ltd on renewal of contracts at my client, and then have a new Ltd with my wife as Director to run the remainder of my contracts until early next year (this is my last ever contract now - but I can't wait until end of year to get the funds out). So the new Ltd may well only exist for a year or less.

Why not take a huge director's loan. You will have to make damned sure you can either liquidate the company or pay this off before 9 months after the company tax year end otherwise you will will be hit with a s455 charge. You can also extend your company's tax year by 6 months which buys you some extra time.

When you are ready for the MVL, the director's loan will be accounted for as a company asset and you will have to pay interest at the HMRC approved rate (about 4%). However, this interest is paid back to the shareholders as dividends (minus CT) so the net cost of the loan is 1% APR.

Not sure if the loan actually has to be physically paid back before the company closes or if it can be a paper transaction where it's accounted for and the balance of your company assets are distributed to you without money needing to change hands. Ask the people who do the MVL and see what they say...

There is no business justification for having a wife as an employee or as a shareholder

You don't need a business justification and it's not a settlement because it's between spouses.

[ChimpMaster]

Are you not going to raise eyebrows creating an artificial situation in order to avoid something else than you would just risking phoenixing the company? The fact you would both still be involved, just the titles change wouldn't make it a pretty easy situation to unpick if they came looking? If there is no business justification for an odd set up they would be rubbing their hands in glee once they found it surely.

Whatever the legal outcome it just doesn't sound right as it doesn't reflect the actual business model.

These are my concerns too, but I'm in a situation where I to get the funds out and closing the current Ltd is most tax efficient way. The plan would be to close my current Ltd on renewal of contracts at my client, and then have a new Ltd with my wife as Director to run the remainder of my contracts until early next year (this is my last ever contract now - but I can't wait until end of year to get the funds out). So the new Ltd may well only exist for a year or less.

Business justification as you put it is the crux of anything we do. There is no business justification for having a wife as an employee or as a shareholder, but many Ltd Cos have this arrangement in place. My proposal is pushing the boat a little further out and it's not ideal, but I'm just wondering if it's better than opening a new Ltd with me as Director again - surely that's more of a red alert? I don't want to shift to an Umbrella.

I seem to remember that there was a well known accountant who was struck off by the ACCA and imprisoned for fraud and his wife formed a phoenix company in order to keep running an accountancy business and what she's done is perfectly legal from what I can tell.

Was the old company insolvent or did it just close down normally? Are you trying to break the link between the two companies by having a different director to keep low on HMRC's radar?

I've known people who have been struck off too and simply run the same business under a new Ltd with wife as sole director, though this was years ago before HMRC became so aggressive.

The old (current Co) is still running and would be liquidated (MVL) at end of current contract, with new Ltd (wife as Director) taking over new contract. Well that's what I'm trying to work out anyway!

As for the Mrs running off with the money - this won't happen (he says ) but wouldn't bother if it ever did. Money's just a numbers game and frankly I couldn't give a damn if she took it all so long as she looked after the kids, which I know she would.

[SueEllen]

Was the old company insolvent or did it just close down normally? Are you trying to break the link between the two companies by having a different director to keep low on HMRC's radar?

Can't remember the channel but there was a documentary on about nurseries recently.

One of the nurseries had the husband as the director. A child died so the nursery was renamed and the wife became the director to throw parents and Ofsted of their the company's record.

All this information was available thanks to Companies House and the websites that use their data.

In addition it helps that 192 and similar websites have good records on current and former residents of an address.

If you going to phoenix your company successfully then it's probably a good idea to use someone who doesn't share your surname or live at one of the addresses you use to live at.

[Wanderer]

Frankly I'm wondering if this is one way to avoid a phoenix company situation.

I seem to remember that there was a well known accountant who was struck off by the ACCA and imprisoned for fraud and his wife formed a phoenix company in order to keep running an accountancy business and what she's done is perfectly legal from what I can tell.

Was the old company insolvent or did it just close down normally? Are you trying to break the link between the two companies by having a different director to keep low on HMRC's radar?

[northernladuk]

My contracts are direct with clients, so no agencies involved. There would be no issue in my wife signing the documents.

Legally I can't see a problem and the tax burden would be the same.

Frankly I'm wondering if this is one way to avoid a phoenix company situation.

Are you not going to raise eyebrows creating an artificial situation in order to avoid something else than you would just risking phoenixing the company? The fact you would both still be involved, just the titles change wouldn't make it a pretty easy situation to unpick if they came looking? If there is no business justification for an odd set up they would be rubbing their hands in glee once they found it surely.

Whatever the legal outcome it just doesn't sound right as it doesn't reflect the actual business model.

[SueEllen]

My contracts are direct with clients, so no agencies involved. There would be no issue in my wife signing the documents.

Legally I can't see a problem and the tax burden would be the same.

The issue is more of a personal legal one rather than a tax legal one.

If something goes wrong in your relationship as she is the director who controls the assets and bank accounts she can decide that you aren't getting anywhere near the money.

While you may be equal shareholders there is nothing stopping her making the money disappear by taking out directors loans.

I know two men who were screwed by their ex-wives doing something similar. The worse was the one who ran off with the accountant as they had been taking money out of the business for over a year.

Frankly I'm wondering if this is one way to avoid a phoenix company situation.

Why would it stop a phoenix company situation?

If I wanted to name my grandmother, my nephew over 16 or whoever in my family as a director for one of my companies as long as they agree there is nothing to stop me. Unscrupulous businessmen often put different relations down as directors for their businesses.

[ChimpMaster]

My contracts are direct with clients, so no agencies involved. There would be no issue in my wife signing the documents.

Legally I can't see a problem and the tax burden would be the same.

Frankly I'm wondering if this is one way to avoid a phoenix company situation.

[TheFaQQer]

Isnt this what HMRC deem as aggressive tax avoidance?

No. It doesn't avoid any tax at all.

[LandRover]

Spouse as director

Isnt this what HMRC deem as aggressive tax avoidance?

[psychocandy]

Why would you want spouse to be only director anyway?

Why can't you be director and make spouse director too? And shareholder?

Surely its less hassle...