Can someone claiming DLA be a Ltd company shareholder

sdyson31

I run a one man ltd company and thinking about adding my wife as a shareholder.

My wife doesn't work, she has Ehlers-Danlos syndromes (EDS) and claims DLA.

My wife does some light weight work for me, like sending emails and preparing invoices.

Is it worth adding her to my company so that she can either earn a salary or get dividend?

I have checked the government guideline and she doesn't need to inform disable service centre on starting a new job.

Reporting changes that affect your PIP - Citizens Advice

KingOfSnake

I cannot comment on the benefits side, but the statutory duties of a Director are found at Part 10A Companies Act. As long as she can fulfil these duties I cannot see any reason why not.
As a normal employee or worker, you'll have to ensure you meet your duties as an employer (H&S, making reasonable adjustments for disability, payroll, contract etc) even though you are married. Again, it is not difficult but cannot be overlooked.
There is plenty of information on the gov.uk website and I would always recommend speaking to a professional (solicitor) to ensure there are no hidden pitfalls.

https://www.legislation.gov.uk/ukpga/2006/46/contents

Grumpy_chap

sdyson31 said:

I run a one man ltd company and thinking about adding my wife as a shareholder.

My wife doesn't work, she has Ehlers-Danlos syndromes (EDS) and claims DLA.

My wife does some light weight work for me, like sending emails and preparing invoices.

Is it worth adding her to my company so that she can either earn a salary or get dividend?

I have checked the government guideline and she doesn't need to inform disable service centre on starting a new job.

Reporting changes that affect your PIP - Citizens Advice

I cannot comment on the benefits side of things, sorry.

Your wife is working for the Ltd Co and, therefore, should be compensated for that effort at least minimum wage.

Your wife can earn a salary (as an employee) without being added to the company as a shareholder to receive dividend.

If you do choose to add your wife as a shareholder, you need to think about the proportion of shares each of you will hold (and the associated proportion of dividend distribution).  In companies like this, the authorities generally take a dim view of "alphabet" shareholdings.

As an established Ltd Co., do you have an Accountant?  If not, then I recommend you should engage the services of an Accountant.  Your Accountant is best-placed to provide advice on matters such as this.

p00hsticks

It's been a while since I ran a limited company, but I seem to recall that if you are employing a relative etc, what you pay must be commensurate with the work they actually do. So HMRC could query it if you are paying them a full time salary and/or a very high hourly rate when they are only doing a couple of hours realtively unskilled work. 

sdyson31

Thank you everyone for your contribution to my post. I really appreciate it.

Is it straight forward to add my wife as an employee? Someone told me that i need to go through the recruitment process?

Can she still claim dividend as an employee?

Mojisola

sdyson31 said:

My wife doesn't work, she has Ehlers-Danlos syndromes (EDS) and claims DLA.
My wife does some light weight work for me, like sending emails and preparing invoices.
Is it worth adding her to my company so that she can either earn a salary or get dividend?
I have checked the government guideline and she doesn't need to inform disable service centre on starting a new job.

DLA is a benefit people who are in full-time employment could claim.

As long as the type of work she does and the hours that she works for don't run counter to what she said in her claim form, there's no issue.

It would be worth her keeping good records of when she works, how long for and the type of work she does in case the DWP query anything.

Grumpy_chap

sdyson31 said:

Thank you everyone for your contribution to my post. I really appreciate it.

Is it straight forward to add my wife as an employee? Someone told me that i need to go through the recruitment process?

Can she still claim dividend as an employee?

Only shareholders get dividends.  

It is possible to be both an employee and a shareholder.

I really recommend that you engage the services of a professional advisor (Accountant) to protect yourself against making uninformed decisions / mistakes that could result in an awkward position.

DoctorStrange

How much are you thinking of compensating your wife?

My reason for asking is that salary is tax deductible whereas dividends can only be paid from post-tax profits.

Depending on the amounts, the balance can be adjusted to minimise the taxes.

Jeremy535897

To clear up some general misconceptions (and I am not commenting on benefit issues):

• your wife can be employed as a director and/or an employee. There is no need for a recruitment process. You can pay her what you like, but a deduction for corporation tax is only valid to the extent to which her services are worth the payment. Sending emails is probably minimum wage. Being a director is onerous and that can be reflected in more pay
• you can give your wife some of your shares and then pay you and her a dividend commensurate with your shareholdings, but beware creating shares with differing rights attached (the reference to alphabet shareholdings above), and paying large dividends out of profits earned before the gift

sdyson31

DoctorStrange said:

How much are you thinking of compensating your wife?

My reason for asking is that salary is tax deductible whereas dividends can only be paid from post-tax profits.

Depending on the amounts, the balance can be adjusted to minimise the taxes.

    I have been thinking about paying her like 10k - 12k per year for part time hours.

sdyson31

Jeremy535897 said:

To clear up some general misconceptions (and I am not commenting on benefit issues):

• your wife can be employed as a director and/or an employee. There is no need for a recruitment process. You can pay her what you like, but a deduction for corporation tax is only valid to the extent to which her services are worth the payment. Sending emails is probably minimum wage. Being a director is onerous and that can be reflected in more pay
• you can give your wife some of your shares and then pay you and her a dividend commensurate with your shareholdings, but beware creating shares with differing rights attached (the reference to alphabet shareholdings above), and paying large dividends out of profits earned before the gift

   My company was setup last year in Sept so year end would be in few days. Can i still take a salary out from my ltd company       before or after the year end? and would it fall in tax year April 2020 - April 2021 ?