Director and SMP/Dividends

angelface329

Hi - not sure if ive posted in the right place - my husband has a hairsalon owned jointly between himself and another director. The other director is due to go on Maternity leave soon and, as they both work in the salon and are busy, they bring in a lot of money. Without her there she wont be 'generating any money' however, she is still wanting to be paid the same 50/50 share of the dividend - even though that amount is dictated by them both working. I guess that they should have thought about this when they started the business but at that point they were a couple and this was about 10 years ago before they split and have now married other people. Is there anything he can do about this - reasoning hasnt worked - as it coudl potentially affect our income as a family.

System

Nothing to be done really. Dividend split is (or should be) decided on the share split in the business. If both your OH and the other director have equal shares then the dividend is split 50/50 regardless of whether she works or not

nikki1520

Change the structure so there is a "wage" for working, then the dividend (after wages) remains a 50/50 split?

System

nikki1520 wrote: »

Change the structure so there is a "wage" for working, then the dividend (after wages) remains a 50/50 split?

They are probably already paying themselves wages but it will be at the minimum they can get away with to reduce tax liability.

nikki1520

!!!!!! wrote: »

They are probably already paying themselves wages but it will be at the minimum they can get away with to reduce tax liability.

And that's when the problem with this sort of arrangement arises. It's all good while everyone is putting the same in, but as soon as someone needs to take a step back, those left behind have to work harder and take an effective pay cut.

It seems that paying more tax, would, in this case, be beneficial

bris

Dividends are paid on profit's, they each have an equal share so split the profit's 50/50.
You need to set up a new agreement where you get paid for your work, on an hourly basis, then split the profits after that. This would mean going PAYE, with the complications that brings.