Arctic Systems etc

Arctic Systems etc

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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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By imbs
28th Mar 2013 22:55

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,

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By imbs
28th Mar 2013 22:56

Also
I don't think HMRC ever got around to legislating against this even though they talked about it...

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By honesty
29th Mar 2013 07:53

What would be the implications of this change if,sadly, there was a divorce?

 

 

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By honesty
29th Mar 2013 07:54

What would be the implications of this change if,sadly, there was a divorce?

 

 

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By imbs
29th Mar 2013 11:29

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.

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By taxhound
29th Mar 2013 12:39

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.

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