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Wife in business as employee but now getting a divorce

Wife in business as employee but now getting a...

My wife has been paid out of my limited company as an employee for the past 4 years but we are now getting a divorce and I would ideally like to stop her salary. Despite the salary, she rarely contributed to the business over the past three years; it was only paid to reduce our overall tax bill.  There is no employment contract in place.

What procedure do I need to follow to make the dismissal effective without receiving an employment tribunal action?


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13th Jul 2012 12:48

Ask your lawyer?

That's all

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By LyneT
13th Jul 2012 12:53



I agree with the above poster.  You need to speak to your lawyer.

However, if you are parting on friendly terms, why not continue to employ her, particularly if you will pay maintenance anyway.  Salaries are tax deductible.  Maintenance payments are not.

Assuming of course that the salary you paid her in the first place was reasonable.

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By ibis
13th Jul 2012 13:26

Thanks for the comments.

WhichTyler: I will anyway just wondered if anyone had any specific points in this area.

LyneT: Good point about tax deductible. However, any lumnp sum payment in lieu of notice would be free of tax to the recipient and we intend to reach a 'clean break' financial settlement that doesn't include the regular payment of maintenance.

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13th Jul 2012 13:52

Employment law will want to see some very good reason for dismissing an employee of 4 years  (presuming of course that she is not ready to leave as quickly as possible).

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By Tosie
13th Jul 2012 14:00

just dealt with similar

Wife resigned as part of clean break neg. with lawyers

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13th Jul 2012 14:02

Third vote for legal assistance

and not just legal assistance, but an employment law specialist.  You already have an employment law problem in that an employee does not have a contract of employment, and advice should be sought to confirm that the termination payments rules in s401 can apply to give the £30,000 exemption, in circumstances where an individual does not have an employment contract.

Are you aware that you may also have a tax issue for past years?  Salaries paid to wives are only tax deductible to the extent that they reflect the open market value of work done (i.e. what you would pay an unconnected individual to do teh work she perforemd.  As "she rarely contributed to the business over the past three years " the implication is that more salary was paid than was justifiable by reference to work done, and teh rest should ahve been added back in your tax computation.

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