How close to the wind do you sail?

I have just lost a small growing business to an aggresive National firm and I want to learn from it.

Last year I discussed with the client the possibility of converting to a limited company since he looked as though he would be paying tax at higher rates in the current year. We were to consider the position again when we knew how well he was doing this year but unfortunately an introduction through a friend of his has seen me lose the client due to the level of savings being promised (current year profits could be c£70,000). It is not a one man service company.

It has been proposed to him that a new company is set up with ownership split 50/50 with his wife. Salaries will be set at minimum level for NI purposes, directors' loan withdrawals will be made during the year and dividends taken post year end to clear any loan account balance. The wife will do nothing in or for the business.

I have a tax partner with a conservative view of these types of arrangement and as a consequence we would not normally do anything as obvious or as close to the limits but I don't believe that I can ignore that fact that this type of arrangement is being actively promoted to my clients.

What views do others have and is there a danger that this type of arrangement will come under attack?

Comments
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What I used to do...

Steve McQueen |
Steve McQueen's picture

Wife's salary

petersaxton |
petersaxton's picture

The only tax problem that I can see...

George Attazder |
George Attazder's picture

The only activity the wife

Mallock |

Rate for the job

petersaxton |
petersaxton's picture

That was my thought too but

Mallock |

In these circs., I recommend the wife does all the paperwork

frustratedwithhmrc |
frustratedwithhmrc's picture

Low salaries, 50:50 dividend split close to the wind?

Mouse007 |

Marriage breakdown

colinhigginson |

Wife wages aren't a problem if she's a director

Ken Howard |

Don't like it but...

MarionMorrison |
MarionMorrison's picture

@Mouse007

SteveOH |
SteveOH's picture

Yep standard practice

Luke |
Luke's picture

off the tinternet

Mouse007 |

Partnership first maybe?

cfield |
cfield's picture

Ha!

ShirleyM |
ShirleyM's picture

Thanks

Mallock |

Mercia CPD perhaps?

Ken Howard |

Is now a time to be reasonable?

frustratedwithhmrc |
frustratedwithhmrc's picture

A Woman's Work...

I'msorryIhaven'taclue |

Wife's Exposure

I'msorryIhaven'taclue |

Rental

djw090 |

51:49

taxhound |
taxhound's picture