I have a question for you guys, hopefully you can help me. Here is the backstory:
Husband and Wife own 2 companies, Company A is 2 years old and sole director is wife, husband is employee of company A; company B just incorporated 6 months ago, a startup, sole director husband, wife is employee of company B.
In last 6 months, husband has used company A as cash cow to fund company B start up costs etc (with wife's permission of course).
I saw those as drawings, every single transaction (cash, card purchases, purchase invoices etc, the lot). As long as the expenses didnt relate to Company A, it was dividends to wife in my eyes.
Total dividends £100k
Husband and wife now understand the tax implications of the dividends and they have asked me to consider the following:
- Reclassify as a loan to company B
- Reclassify as an investment in company B
- Raise a sales invoice for £100k + 20% mgt fee + vat to Company B for reimbursement of expenses and for work done for company B; reclassify dividends as cost of sales
Accounts need to be filed in 7 days!
Am in right in standing my ground? What would you do and why?
Thanking you in advance.