Reply to: Is it legal for a shareholder to work through my company?

[ASB]

I thought there were two issues here, one being the different class and the other being S660?

So two elements of risk with this set up?

Potentially but it depends on tthe fact. There is no more or less risk of s660 issues with different classes of shares or the same class.

However the practice in which different share classes are issuued is such that there is often an element of bounty in them.

So the brother owns some shares. He does some work. It is not unreasonable for him to have an equity interest. Under those circumstances I dont see any bounty. But it could depend on when they were issued. It could also depwnd on why and what if anything was paid for them.

[northernladuk]

I thought there were two issues here, one being the different class and the other being S660?

So two elements of risk with this set up?

[Gulliver]

Drop me an email - lets not do your personal stuff in a public forum?

I'll be picking up email over the weekend.

Email sent.

[Jessica@WhiteFieldTax]

Maybe. Rather depends on how much the brother paid for his share, doesn't it.

But as was said at the start, this is an S660a fail unless the OP is paying all the tax due on both his dividends and his brother's.

Separating from advising a client of mine (which I won't do in public) and the general point...

...no, alphabet shares are not an automatic S660a fail. Simplifying an awful lot, they are only a fail if they are bounteous. There are many commercial situations where they address the needs of a company, albeit they need to be set up properly and with advice. Away from advice to PSCs, they've been used for years, and will continue to be. Arctic Systems etc just adds a realm of complexity, as does the Employment Related Security rules, and many other aspects of the tax code.

[malvolio]

Is it me or us there something behind this with a piscean odour?

Maybe. Rather depends on how much the brother paid for his share, doesn't it.

But as was said at the start, this is an S660a fail unless the OP is paying all the tax due on both his dividends and his brother's.

[stek]

Is it me or us there something behind this with a piscean odour?

[Jessica@WhiteFieldTax]

(b) paying the C shareholder (dividend? salary? both?). - So which one?

Drop me an email - lets not do your personal stuff in a public forum?

I'll be picking up email over the weekend.

[Gulliver]

As others have said, there are two different issues, (a) raising invoices for work done - other than vat threshold & liability implications, no real issue (b) paying the C shareholder (dividend? salary? both?).

Alphabet shares can create issues, but I'm not unduly vexed in this circumstance.

(b) paying the C shareholder (dividend? salary? both?). - So which one?

[Gulliver]

I think the question you want to be asking is how much trouble are you in with a family member as a shareholder and holding different classes of share in the LTD.

I don't know anything about C shares but can you have 101% ownership??

You have an accountant right?

The reason to use different share classes because if I was putting him under the same share class as me I would have an obligation to pay him at the same date I pay myself a dividend. Eg if I had 99% A share and he 99% A shares then when I pay myself £990 I would need to pay him £10. With this different share class I can pay him "when I want". This info is from my previous accountant by the way. Who I had to leave because of bad advise on something else

[Gulliver]

It's your company that issues invoices, not any particular person. Your company can issue invoices to anyone that its representatives have done work for. The company can then chose how to remunerate people - they can have salary, dividends or a mix of the two. They can be employees (if they have salary) or just be shareholders (and get dividends).

So yes, your brother can be paid by your company and the company can issue invoices for the work he carries out for clients.

There is a whole different can of worms with the issues NLUK highlights above of course.

Thanks, that's a straightforward answer. Just what I was looking for! Thanks!!

[Gulliver]

I have it on good authority that they've mostly gone home for the weekend, other than the boss lady who is following shortly.

Hi Jessica,

I'm your client and I could not hold of your office to ask this question! But I'm glad you are here to answer. I thought everyone at Whitefiled has gone home

BN

[Jessica@WhiteFieldTax]

You have an accountant right?

I have it on good authority that they've mostly gone home for the weekend, other than the boss lady who is following shortly.

[Jessica@WhiteFieldTax]

So what are C shares? The only definition I can find doesn't make sense for our situations..

Bog standard alphabet shares. Once you have ordinary, ordinary A, Ordinary B, you move on to ordinary C - they are nothing special.

[Jessica@WhiteFieldTax]

As others have said, there are two different issues, (a) raising invoices for work done - other than vat threshold & liability implications, no real issue (b) paying the C shareholder (dividend? salary? both?).

Alphabet shares can create issues, but I'm not unduly vexed in this circumstance.

[northernladuk]

So what are C shares? The only definition I can find doesn't make sense for our situations..

C shares
An Investment Trust being a corporate legal entity, may issue C shares (or ‘conversion’ shares) which are a method of raising new funds without penalising existing shareholders. The new money raised is maintained as a discrete pool which is kept separate from the existing fund for a specified period and all the costs of investment are borne by those subscribing for the new shares. The holders of the 'C' shares are then offered new ordinary shares at the combined net asset value of the enlarged Trust.