Can someone claiming DLA be a Ltd company shareholder

Jeremy535897

Salary is normally taxable when you become entitled to it. Presumably you are on a payroll? Is it an annual scheme by any chance?

Salary paid now will fall into 2021/22, not 2020/21. Salary paid by 30 September 2021 should be deductible from the company's profit for corporation tax for the year to 30 September 2021. After then, it should be deductible in the year to 30 September 2022.

DoctorStrange

sdyson31 said:

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.

You can pay up to £8,844 free of corporation tax, but after that you have to pay Employers NIC at 13.8% (soon to be 15.05%).

You'll also have to consider what this means from your wife's perspective I.e. what impact additional earnings will have on her benefits/personal tax status.

sdyson31

Jeremy535897 said:

Salary is normally taxable when you become entitled to it. Presumably you are on a payroll? Is it an annual scheme by any chance?

Salary paid now will fall into 2021/22, not 2020/21. Salary paid by 30 September 2021 should be deductible from the company's profit for corporation tax for the year to 30 September 2021. After then, it should be deductible in the year to 30 September 2022.

    Got it. 

    What about divided? My company's year end is in few days and if i receive dividend after paying 19% cooperate tax then would this divided income still fall in 2021/2022?

lisyloo

p00hsticks said:

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. 

The question was about being a shareholder not an employee.
I’m a director and take divs for doing nothing.
paying divs to spouse is a way of avoiding higher rate tax if the spouse pays lower rate

Jeremy535897

sdyson31 said:

Jeremy535897 said:

Salary is normally taxable when you become entitled to it. Presumably you are on a payroll? Is it an annual scheme by any chance?

Salary paid now will fall into 2021/22, not 2020/21. Salary paid by 30 September 2021 should be deductible from the company's profit for corporation tax for the year to 30 September 2021. After then, it should be deductible in the year to 30 September 2022.

    Got it. 

    What about divided? My company's year end is in few days and if i receive dividend after paying 19% cooperate tax then would this divided income still fall in 2021/2022?

Dividends are normally taxed on the recipient when paid. The timing of a dividend does not normally affect the company's tax, unless there is an overdrawn director's loan account to address.

p00hsticks

lisyloo said:

p00hsticks said:

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. 

The question was about being a shareholder not an employee.

I read it as being about both - the OP said "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"

sdyson31

I think i have now better understanding on shareholder and director's responsibilities.

Can my wife be a shareholder in my company? Lets say 50%-75% shareholder? 

After paying cooperate tax, there will be a big chuck of money left in profit which i don't tend to take out because i am paying higher tax on PAYE income.

If i pay the divided to my wife then she will only pay 7.5% tax. She claims DLA, don't know if being a shareholder would have any impact on her benefits

Any thoughts?

 

Jeremy535897

sdyson31 said:

I think i have now better understanding on shareholder and director's responsibilities.

Can my wife be a shareholder in my company? Lets say 50%-75% shareholder? 

After paying cooperate tax, there will be a big chuck of money left in profit which i don't tend to take out because i am paying higher tax on PAYE income.

If i pay the divided to my wife then she will only pay 7.5% tax. She claims DLA, don't know if being a shareholder would have any impact on her benefits

Any thoughts?

 

Your wife will only be able to receive a dividend if she owns shares. The most straightforward way to achieve this is for you to give her some of your shares. That means that she will own them, have voting rights etc.

If the company pays a dividend, you and your wife will receive that dividend in proportion to your shareholdings. Some will therefore be taxed at your marginal rate and some at hers. DLA is not means tested.

Any attempt to achieve more than this (for example by creating a separate class of shares for your wife and only paying a dividend on those shares) may fall foul of anti-avoidance provisions and case law (Arctic Systems case).

sdyson31

Jeremy535897 said:

sdyson31 said:

I think i have now better understanding on shareholder and director's responsibilities.

Can my wife be a shareholder in my company? Lets say 50%-75% shareholder? 

After paying cooperate tax, there will be a big chuck of money left in profit which i don't tend to take out because i am paying higher tax on PAYE income.

If i pay the divided to my wife then she will only pay 7.5% tax. She claims DLA, don't know if being a shareholder would have any impact on her benefits

Any thoughts?

 

Your wife will only be able to receive a dividend if she owns shares. The most straightforward way to achieve this is for you to give her some of your shares. That means that she will own them, have voting rights etc.

If the company pays a dividend, you and your wife will receive that dividend in proportion to your shareholdings. Some will therefore be taxed at your marginal rate and some at hers. DLA is not means tested.

Any attempt to achieve more than this (for example by creating a separate class of shares for your wife and only paying a dividend on those shares) may fall foul of anti-avoidance provisions and case law (Arctic Systems case).

    What do i need to do to give some of my shares to my wife? Does she need to be a shareholder? Is there any guide available on transferring shares?

csgohan4

sdyson31 said:

Jeremy535897 said:

sdyson31 said:

I think i have now better understanding on shareholder and director's responsibilities.

Can my wife be a shareholder in my company? Lets say 50%-75% shareholder? 

After paying cooperate tax, there will be a big chuck of money left in profit which i don't tend to take out because i am paying higher tax on PAYE income.

If i pay the divided to my wife then she will only pay 7.5% tax. She claims DLA, don't know if being a shareholder would have any impact on her benefits

Any thoughts?

 

Your wife will only be able to receive a dividend if she owns shares. The most straightforward way to achieve this is for you to give her some of your shares. That means that she will own them, have voting rights etc.

If the company pays a dividend, you and your wife will receive that dividend in proportion to your shareholdings. Some will therefore be taxed at your marginal rate and some at hers. DLA is not means tested.

Any attempt to achieve more than this (for example by creating a separate class of shares for your wife and only paying a dividend on those shares) may fall foul of anti-avoidance provisions and case law (Arctic Systems case).

    What do i need to do to give some of my shares to my wife? Does she need to be a shareholder? Is there any guide available on transferring shares?

You need to take care when your considering giving shares to wife, as mentioned above, if you fall foul of the settlement legislation your going to be in a world of Pain.

Above mentioned Artic system case, but it is not a free for all even though hmrc lost. 

You need to get professional advice as this is a complex area, get it wrong and HMRC will come chasing you. The questions your asking you really do need an accountant. I have one myself as I know my limits.