Having the wife as company secretary

[williaa68]

Having been an employee for many years I am just about to strike out on my own as a self employed consultant. My old employer will be my first client but only about the equivalent of one day per week. I am thinking of employing my wife as the company secretary of my to-be-established company. She is a solicitor, still on the roll but non-practicing, but I am thinking that paying her a modest salary below the NI threshold (say £7,500 per year) would be a tax effective way to extract cash from the company? The company could also presumably pay pension contributions for her - at the moment she has no income other than investment income. Thoughts very welcome, whether on this topic or matters generally. Thanks in advance.

[Jockman]

Do you need a Company Secretary?

Why not just a normal Director?

The NI figure you are looking for is £8,060.

[Eric Mc]

Since the 2006 Companies Act, small companies don't have to have a Company Secretary.

[Jockman]

[Sheepshanks]

Jockman said:

The NI figure you are looking for is £8,060.

Isn't it best to pay just below this, so no NI is payable but the employee still qualifies for the benefits?

[bigandclever]

Will you actually be self-employed?
Thought about IR35? Previous employer being (seemingly) first and only client and all that.
What will your missus actually do to earn the secretary salary?
And so on ...

[loafer123]

Don't forget dividends up to £5k are also tax free now.

[red_slr]

Will need to be a share holder though for that..

[Tonsko]

bigandclever said:

Will you actually be self-employed?
Thought about IR35? Previous employer being (seemingly) first and only client and all that.
What will your missus actually do to earn the secretary salary?
And so on ...

Does anyone actually know somebody who was found to be outside IR35 and taken to court successfully?

[PurpleMoonlight]

loafer123 said:

Don't forget dividends up to £5k are also tax free now.

You write that as if it is some newly introduced benefit when it isn't and in any event is not true.

Higher rate tax can still be liable if other income uses up all the personal allowance and 20% tax band.

[JBM78]

PurpleMoonlight said:

You write that as if it is some newly introduced benefit when it isn't and in any event is not true.

Higher rate tax can still be liable if other income uses up all the personal allowance and 20% tax band.

No - Since April there's no tax on the first £5k of dividends, no matter what your other (non-dividend) income is. You could earn £1m salary, and still pay no tax on your first £5k of dividends.

[Eric Mc]

Tonsko said:

bigandclever said:

Will you actually be self-employed?
Thought about IR35? Previous employer being (seemingly) first and only client and all that.
What will your missus actually do to earn the secretary salary?
And so on ...

Does anyone actually know somebody who was found to be outside IR35 and taken to court successfully?

Not personally but there have been quite a few cases now. Read up on this one -

http://www.contractoruk.com/ir35/why_dragonfly_got...

[Eric Mc]

JBM78 said:

No - Since April there's no tax on the first £5k of dividends, no matter what your other (non-dividend) income is. You could earn £1m salary, and still pay no tax on your first £5k of dividends.

Prior to 5 April, effectively, the entire dividend amount that fell within the basic rate tax band was tax free (often around £30,000 worth of dividends). Now only £5,000 is tax free. So the situation is not as good as it used to be - which is the whole point of the change.

[Jockman]

Sheepshanks said:

Jockman said:

The NI figure you are looking for is £8,060.

Isn't it best to pay just below this, so no NI is payable but the employee still qualifies for the benefits?

No NI is payable at this level by the Employer or the Employee. £1 more and that changes. Corp Tax relief of 20%. Full NI benefits.

[loafer123]

Eric Mc said:

JBM78 said:

No - Since April there's no tax on the first £5k of dividends, no matter what your other (non-dividend) income is. You could earn £1m salary, and still pay no tax on your first £5k of dividends.

Prior to 5 April, effectively, the entire dividend amount that fell within the basic rate tax band was tax free (often around £30,000 worth of dividends). Now only £5,000 is tax free. So the situation is not as good as it used to be - which is the whole point of the change.

True, but it is still a way of him saving tax, which is why I mentioned it.

[Eric Mc]

It's better than nothing - but worse than it used to be.

His solution is as follows -

forget the notion of a company secretary
make the wife a director
pay the wife a salary - the level to be decided
pay the wife a dividend based on her shareholding - depending on whether the company can afford dividends or not

If IR35 is a possible issue, take professional advice regarding how the company needs to be managed and run in order to mitigate the danger of a successful IR35 attack by HMRC. If the company only has one customer/client, then IR35 wil certainly need to be taken into account. If that customer is one of teh director's former employers, then IR35 is a very, very live issue.

[PurpleMoonlight]

JBM78 said:

No - Since April there's no tax on the first £5k of dividends, no matter what your other (non-dividend) income is. You could earn £1m salary, and still pay no tax on your first £5k of dividends.

Yes, you are correct. My apologies.

[Tonsko]

Eric Mc said:

Not personally but there have been quite a few cases now. Read up on this one -

http://www.contractoruk.com/ir35/why_dragonfly_got...

So there are a few. I was beginning to think that they were hen's teeth. That said, I've seen the figures that the gov't were expecting to get when this legislation was introduced, and the actual figure (such as has been released) is but a paltry single digit percentage.

What's also annoying, is that some senior establishment figures run their affairs like this as well.

[bigandclever]

Tonsko said:

Eric Mc said:

Not personally but there have been quite a few cases now. Read up on this one -

http://www.contractoruk.com/ir35/why_dragonfly_got...

So there are a few. I was beginning to think that they were hen's teeth. That said, I've seen the figures that the gov't were expecting to get when this legislation was introduced, and the actual figure (such as has been released) is but a paltry single digit percentage.

What's also annoying, is that some senior establishment figures run their affairs like this as well.

We've no idea how many get investigated and capitulate at the first hurdle so their case never gets close to the prosecution stage. Or how many 'self-select' and operate as caught.

[williaa68]

All very helpful - thank you all very much.