Reply to: Employers liability insurance to cover company secretary?

[TheCyclingProgrammer]

Thanks for that clarification, I was misunderstanding that.
I got a call from the insurance company to clarify now and what you mentioned, sole traders don't need EL in that case, but limited companies are required by law even when it's just a family member helping with the bookkeeping.

Thanks!

I've had the same misunderstanding myself before.

[mickael28]

You do not need EL if the employer is a family member.

This does not apply to a limited company as it is the company who is the employer, not a family member.

In other words it's only sole traders or partnerships who employ family members who do not need EL.

Thanks for that clarification, I was misunderstanding that.
I got a call from the insurance company to clarify now and what you mentioned, sole traders don't need EL in that case, but limited companies are required by law even when it's just a family member helping with the bookkeeping.

Thanks!

[TheCyclingProgrammer]

Although reading the info above it seems that Employers Liability was even required when the only employ was a family member? so not sure if that was not correct before, something has changed since then, or I'm not understanding the links I posted correctly where it seems this insurance is nor required...

Previously it was mentioned:

You do not need EL if the employer is a family member.

This does not apply to a limited company as it is the company who is the employer, not a family member.

In other words it's only sole traders or partnerships who employ family members who do not need EL.

[SueEllen]

I suggest you refer to the Act itself or a neutral party rather than a company selling insurances take on it. The Health and Safety executive have information explaining it in simple terms if you Google their website. Google something like "employers liability insurance health and safety executive" and you should get a link to a PDF explaining it.

Btw Depending where you get your insurance from and what insurances you have you are likely to find the price of employers liability insurance very small. I buy mine with public liability cover and office contents away from home insurance covering the whole of Europe. Removing the EL from it saved something like £10. There is also no need to buy all your business insurance from one provider as while it's easier it is not always cheaper.

[mickael28]

It's been the case since 2011 when I had to investigate it.

You do need Employers Liability Insurance by law if the employees of your company aren't family members.

Although reading the info above it seems that Employers Liability was even required when the only employ was a family member? so not sure if that was not correct before, something has changed since then, or I'm not understanding the links I posted correctly where it seems this insurance is nor required...

Previously it was mentioned:

Employers Liability Insurance is legally required in some potentially unexpected circumstances – for example, where a Limited Company contractor employs their partner/spouse to carry out clerical work or bookkeeping for the business.

[SueEllen]

It's been the case since 2011 when I had to investigate it.

You do need Employers Liability Insurance by law if the employees of your company aren't family members.

[mickael28]

It appears that you do indeed need EL to cover your legal responsibilities...

http://www.qdosconsulting.com/freela...lity-insurance

Employers Liability Insurance is legally required in some potentially unexpected circumstances – for example, where a Limited Company contractor employs their partner/spouse to carry out clerical work or bookkeeping for the business.

Hi guys, sorry to restart the old thread but it seems quite relevant. I was having the same doubt and reading about it now:

* Employers’ Liability (Compulsory Insurance) Act 1969

This Act shall not require an employer to insure—

(a)in respect of an employee of whom the employer is the husband, wife,[F1civil partner,] father, mother, grandfather, grandmother, step-father, step-mother, son, daughter, grandson, granddaughter, stepson, stepdaughter, brother, sister, half-brother or half-sister; or

* https://www.abi.org.uk/Insurance-and...lity-insurance

Exempt businesses
Some businesses are not required to have employers’ liability insurance, including:

companies with no employees
family businesses that employ only family members

it seems to imply that if the person working within the company is a family member Employers' liability is not required, is that now the case?

Do you know if this requirement has changed in the last few years?, as it seems that from the previous discussion such an insurance was mandatory by law a few years ago...

[TheCyclingProgrammer]

It might be a legal requirement but unless she is she going to sue you or complain about not having employer's indemnity insurance then no one is really going to be bothered about it (except the people selling insurance because they will miss out on making some money for old rope).....

You know, I agree with your sentiment and do think it's pretty ridiculous. But for the sake of an extra £100 a year I'd rather not risk a massive fine (and the fines are massive).

[Wanderer]

My partner is now company secretary and will also be taking over some admin duties and receives a small salary so my understanding is that I'm now legally obliged to get employers liability insurance (we aren't yet married so I don't think the family exemption applies).

It might be a legal requirement but unless she is she going to sue you or complain about not having employer's indemnity insurance then no one is really going to be bothered about it (except the people selling insurance because they will miss out on making some money for old rope).....

[northernladuk]

It was only for CGT. She paid the same that I paid for them originally, as you say, a pound. As I've mentioned on here before, I was wrongly advised by my (now former) accountant that I didn't need to worry about CGT as there was no gain (because she paid me what I paid for them).

It is a bit surprising. I think common sense would dictate that you bought the shares of a non trading company with nothing in the bank and no revenue stream for a pound and now it has a 5 figure income and money in the bank it would be worth more. Saying that common sense isn't applied to many things when dealing with HMRC and finances.

Anyway, interesting stuff thanks.

[TheCyclingProgrammer]

There must be a cut off at some point where it isn't worth it?

Just to pick up on this last point. I'm sure there probably is - even with a holdover relief claim, the CGT has to be paid at some point but it's hard to imagine a situation where for the average IT contractor that the valuation of their company would be so high that the CGT on the share transfer would exceed the longer term benefits to the recipient of the shares.

[TheCyclingProgrammer]

So out of interest did your partner pay a 'reasonable' market share for these as a result of this valuation process or did you give the shares for a pound and valuation was only for CGT?

It was only for CGT. She paid the same that I paid for them originally, as you say, a pound. As I've mentioned on here before, I was wrongly advised by my (now former) accountant that I didn't need to worry about CGT as there was no gain (because she paid me what I paid for them).

Not sure how he got this wrong as HMRC guidance is quite clear that gifts of assets need to be calculated at market value for CGT purposes and I kicked myself for not checking sooner. Fortunately it was in the last tax year so was easily rectified and new accountant and said tax specialist has since done so.

Is it not complicated tax wise that she pays for the shares which you get taxed on so have to balance the amount of tax paid for the share sale against the tax saved by using her as a tax mule? There must be a cut off at some point where it isn't worth it?

It's not that complicated. In my particular circumstances, the share valuation fell within the £10.5k annual CGT allowance, so there was no tax to pay on the gain. This was further helped the fact that the valuation was discounted due to it being a minority shareholding. Tax specialist was conservative with the discount to provide some wiggle room in the unlikely event that HMRC challenge the valuation.

If the valuation had been higher, or say, she had a 50% share (so no minority discount), then I could have put in a claim for gift-holdover relief. This does make things more complicated but said tax specialist would have dealt with it for me if needed.

[northernladuk]

Well the tax specialist who did mine managed although that was just for CGT purposes. But I know what you're saying.

So out of interest did your partner pay a 'reasonable' market share for these as a result of this valuation process or did you give the shares for a pound and valuation was only for CGT? Is it not complicated tax wise that she pays for the shares which you get taxed on so have to balance the amount of tax paid for the share sale against the tax saved by using her as a tax mule? There must be a cut off at some point where it isn't worth it?

[TheCyclingProgrammer]

But then people write stuff like this which then re-complicates the issue...

Lots of people have written lots of stuff about settlements. A lot of it inaccurate. The vast majority of articles on the subject gloss over the subtleties over the legislation and some are just plain wrong in their understanding.

And then other that say valuing a contractors Limited is almost impossible. What a minefield!!

Well the tax specialist who did mine managed although that was just for CGT purposes (and as it turns out, a minority shareholding in a contractor Ltd company isn't worth that much ). But I know what you're saying.

We need a test case

For unmarried partners...yes, if only to provide the same clarification that married couples got from the Arctic case (even though the way the legislation is written, there isn't a whole lot of difference between married and unmarried couples as to whether you are caught). But I don't see one happening any time soon and I can live with it. I certainly agree that thanks to Arctic, being married further reduces the chances of HMRC taking any notice, even though there are circumstances where you can still be married and caught.

[northernladuk]

Sure, but an unmarried partner is not a connected person as far as the settlements legislation is concerned anyway. In fact, I'm pretty sure that besides a spouse/civil partner, the only other specific connected person mentioned in the legislation are children.

But then people write stuff like this which then re-complicates the issue...

Can I transfer shares to anyone apart from my spouse?

There is nothing in the law that says a contractor cannot transfer shares to any person they wish to, including their children, other family, friends and so on. The problem will arise that if the shares are transferred to anyone who is not actively working within the business, the settlements legislation will almost certainly apply.

Contractors can transfer shares to their children, mother-in-law, and even their mate down the pub, and many have in the past. But it may only be a matter of time before HMRC catches up with the contractor and applies hefty back taxes, interest and penalties.

Transferring shares within a contractor limited company

And then other that say valuing a contractors Limited is almost impossible. What a minefield!!

We need a test case