I have a new client who has been running a successful company for many years. He is paid via a significant PAYE salary.
I have suggested he consider transferring some of his shares (he owns 100%) to his wife then reduce his salary and pay dividends to both of them.
Any problems?
Replies (6)
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I can't see a problem
Just make sure the wife does some work eg admin, minutes, keeps papers in order.
You'd probably need to make her a director as well so she is exempt from minimum wage legislation. So they both take min salary and top up dividend,
Also
I don't think HMRC ever got around to legislating against this even though they talked about it...
Shareholders agreement
I must admit to overlooking this possibility when advising clients but you raise a good point.
Perhaps best idea would be to issue A and B shares with different rights eg B shares no voting rights. Also consider shareholders agreement. These can be drawn up for about £750 plus vat.
If the A and B shares had different rights....
If the A and B shares had different rights, then the settlements legislation may well apply. Look at the Young v Scrutton and Young v Pearce cases. Proceed with great care!
As things stand at the moment, transferring some of the existing ordinary shares to wife should be ok. Paying her a salary is only ok to the extent that she earns it. So if she only does 2 hours a week, a salary of £624 per month is probably excessive.