Ltd Co who take on family

Ltd Co who take on family

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Hi

I have a client who is a limited company, he pays himself minimum wage (£7696) and dividends, he also pays his mum minimum wage (£7696) to do his secretarial work, he wants to give his mum dividends as well but am not sure how much to put through, his profit is £80k, he has currently take out £34,000 for himself and wants to know how much more he can take out before getting taxed, I have advised on rates and amounts.  

I do not want to give his much too many dividends if it will end up in some sort of investigation, after all he does the majority of the work so he will get the majority of the pay.

Any advise would be greatly appreciated.

Replies (8)

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By johngroganjga
03rd Jun 2014 11:45

You don't mention who owns the shares.

By the way, £7,696 is not the minimum wage. It is the maximum wage that can be paid without triggering an NI liability.

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By A E Scott
03rd Jun 2014 12:06

He owns 5 but is thinking of giving his mum 2, his annual return is due shortly which i will need to amend following this conversation.

Sorry yes it is at the secondary NI threshold.

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By lionofludesch
03rd Jun 2014 12:08

How many hours?

Agree with John - how many hours do these people work ?

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By A E Scott
03rd Jun 2014 12:15

The owner of the company works full time and travels frequently and is away for months at a time, the mother organises his travel and sorts all of his paperwork out, collects and sorts mail while he is away, which equates to a few hours per week, give or take.

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By lionofludesch
03rd Jun 2014 12:25

Bit more than minimum wage

So it's a bit more than minimum wage for his mum ?  £30 an hour or so ?

How much does he want to pay her in her "remuneration package " ?

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By A E Scott
03rd Jun 2014 12:45

Sorry minimum age was the wrong working.  He wants to pay her the amount of £7696 as a wage and around £20k as a dividend, but she doesn't do that much work, thats why I'm querying it!

How would HMRC view this type of transaction?

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By A E Scott
05th Jun 2014 16:36

Doe anyone have any more info on this one, thanks in advance.

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By lionofludesch
05th Jun 2014 18:07

Client's choice

The risk with the salary is that it will be challenged as not being for the purpose of the trade and disallowed for Corporation Tax.

Not sure about the shares - I've not had personal experience - but I'd be toey about the possibility of the shares being considered to be a settlement.

The client needs to be made aware of the risks and then he can make his choice.

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