Budget 16th March 2016

[jamesbrown]

Thanks. I need to query again with my Accountant. I was asked how much I intended to contribute to her pension this year and I said approx £12,000. He said that should be ok. Not so sure now.

I don't think the issue is the limit in this case, because the greater of 3.6k or salary is for a personal contribution (i.e. made by your wife to her own SIPP), not an employer contribution (i.e. made by YourCo to your wife as a director). So, if this is a contribution from YourCo, the overall limit of 40k applies (inc. any personal contribution from your wife). Rather, I think the issue is whether it's a valid business expense, and I don't see how it can be if she isn't doing anything for the company.... but I'm not an accountant.

[billridley]

I don't think the issue is the limit in this case, because the greater of 3.6k or salary is for a personal contribution (i.e. made by your wife to her own SIPP), not an employer contribution (i.e. made by YourCo to your wife as a director). So, if this is a contribution from YourCo, the overall limit of 40k applies (inc. any personal contribution from your wife). Rather, I think the issue is whether it's a valid business expense, and I don't see how it can be if she isn't doing anything for the company.... but I'm not an accountant.

Thanks for your viewpoint JamesBrown. Perhaps I have to give her an admin job on minimum salary updating my accounting transactions into FreeAgent and filing my expense receipts and company paperwork.

[WordIsBond]

Well, she's due some compensation for the legal responsibility of being a director. If that is paid in pension, or salary, or if she chooses to forgo it and not have any compensation, doesn't really matter -- some kind of compensation would be entirely appropriate and defensible. Seems very unlikely HMRC would challenge £12K going into a director's pension unless you are doing other stuff wrong and they just want to throw the book at you for everything they can come up with.

I suspect if you'd said £40K your accountant would have said it is a bad idea. £12K? Probably fine. Where exactly the threshold sits would be hard to say. But it is certainly true that you can do something, even if all she does in the company is sign the accounts at the end of the year.

It's going to show up in the accounts as a director's pension, and they are going to say, "Yeah, we see that all the time, nothing unusual there. Anything interesting in the next company's accounts?"

[jamesbrown]

It's going to depend on the facts of the case. See here. My reading is that the other director doesn't do any work/admin, and hasn't received any remuneration (salary or pension) in the past as a reflection of that. Their pension fund may be underfunded but, if I were looking at those facts, I'd struggle to see this as a valid business expense without some further evidence that they had started to contribute meaningfully (at a 12k level). YMMV. It depends on your risk tolerance. I can see many accountants not being comfortable with that, but perhaps some will chime in...

[billridley]

Thanks

Thanks for your comments. Appreciate them. Gave me something to think about. Cheers

[WordIsBond]

Yeah. My wife does all bookkeeping, bank stuff, payroll, etc. I don't think I'd go to £12K, or even £8K, if she didn't, personally, but I have a low risk tolerance.

Practically, it is probably pretty safe, just because of the difficulty of proving what is "too much" for a non-exec director. It's just not the kind of thing HMRC is likely to challenge. But as you said, YMMV.

[northernladuk]

Thanks for your viewpoint JamesBrown. Perhaps I have to give her an admin job on minimum salary updating my accounting transactions into FreeAgent and filing my expense receipts and company paperwork.

Cool. That's all of 15 mins a week then. Can't give her a job when one doesn't exist.

[billridley]

Cool. That's all of 15 mins a week then. Can't give her a job when one doesn't exist.

I wasn't being serious about that. Too near retirement to take any risk.

[Waldorf]

The OTS report hints at a consultation on IR35, I wonder if this is going to be announced in the Budget on the 16th?

[jamesbrown]

The OTS report hints at a consultation on IR35, I wonder if this is going to be announced in the Budget on the 16th?

Quite likely. The delay is approaching 6 months already. I suppose it depends whether they have a more comprehensive (read: simplistic) solution in mind. Once it gets to the consultation stage it's essentially a statement of policy intent, unlikely to be reversed or moderated significantly, so we'll then know what's coming (and where to relocate ).