New Dividend rules.

[Marcellus]

Eric Mc said:

Marcellus said:

Eric Mc said:

Is there a reason why she doesn't?

Their job already takes them well into top rate tax band!

Fair enough. No point in paying a salary if it is going to be taxed in its entirety at the higher rates of tax.

Of course, her dividends (over £5,000) will also be taxed at the higher rates of tax pertaining to dividends.

So, the question has to be, why IS she a director/shareholder of the company?

For the business no real reason apart from we started the business together and once it gained traction they moved on to new projects.... emotionally for the same reason we have joint bank accounts/mortgages etc etc etc!

[louiebaby]

Jockman said:

Ever thought of paying her in pension contributions?

This is interesting, how would that work?

(For context, my wife and I have started a company. I have a full time job, and she is a stay at home Mum. If we're successful, after paying her salary, and dividends of £4,999 each, we may need to look to other ways of getting money out of the company in a tax efficient way.)

[Jockman]

louiebaby said:

Jockman said:

Ever thought of paying her in pension contributions?

This is interesting, how would that work?

(For context, my wife and I have started a company. I have a full time job, and she is a stay at home Mum. If we're successful, after paying her salary, and dividends of £4,999 each, we may need to look to other ways of getting money out of the company in a tax efficient way.)

In basic terms it is a 'form' of salary sacrifice which HMRC is not targetting. As a Shareholder, your wife has certain fiduciary duties and will obviously attend shareholder meetings.

Set up a pension for her to receive payments but remember it will be a long time before you can access this money. Furthermore, the payment must be reasonable and proportionate. You would be unwise to put in £40k for someone with 1 share attending 1 meeting every year. Keep it real.

Ensure she is a Director too.

[Eric Mc]

Marcellus said:

For the business no real reason apart from we started the business together and once it gained traction they moved on to new projects.... emotionally for the same reason we have joint bank accounts/mortgages etc etc etc!

Apart from an emotional element, I can't see much reason for keeping her involved at the moment. The ONLY advantage is that you COULD allocate her a dividend up to £5,000 which would be tax free. The easiest way to do this is for her to reduce her shareholding.

As things currently stand, her position as a director of the company exposes her to the commitments and risks of being a director for no reward.

[sumo69]

Listen to "Jockman" above if yo don't want to go the dividends > £5k route.

Also I have around 20 companies running A and B shares (a few with C and D as well) and to date I have not had any "twitching" from HMRC.

I do insist on the main worker/director having a majority holding, but that still leaves alot of flexibility.

[Eric Mc]

HMRC are currently pretty much dysfunctional. To me, as an organisation they are twitching the way a dying fish twitches.

[bladebloke]

I can't comment on the taxation aspect, but I would have thought that the simplest way in terms of company procedure would be to issue two new kinds of shares rather than just one. Say 'Ordinary A' and 'Ordinary B'. You both keep the original shares, and take one of each of the new classes each.

Then dividends can just be declared on the two new classes in the appropriate amounts and nothing can be declared on the original, 'Ordinary' shares - saves transfers etc, which would be subject to stamp duty.

[Eric Mc]

There is nothing wrong legally wth any of that. But it does increase the risk of HMRC wanting to know why this arrangement has been put on place OTHER than to manipulate taxes.

[RegMolehusband]

And in the meantime, whilst the hard working small businessman is clobbered for thousands under the new dividend rules or can't offset mortgage payments on a humble BTL property, Osborne is doing a Tony Blair and earning £XXXXXX for doing speeches.