splitting a company between wife and husband

splitting a company between wife and husband

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A sole trader want to convert the business into a limited company and give 50% of shares to his wife (who is no working).  She will just be doing the customer service, administration and accounting.  I understand 50% of the shares maybe too high and perhaps 30% would be fairer and reasonable.  I recall some legal case a while ago but just cannot remember the ins and outs.  Can 50% be justified to HMRC ?

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By marks
08th May 2014 00:17

totally justied

She is a shareholder, not an employee, so at the moment there is no restriction of her owning 50% of the shares and receiving 50% of the dividends.   She doesnt need to do anything for her dividends like the shareholders in BT dont need to do anything to get their dividends.  If this changes then could have significant impact on many small business as may are set up like this. Husband does the work but shares are split 50/50 to maximise tax free dividend take.

The case you are probably thinking off is the Arctic case (Jones v Garnett I think it was).

Mark

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