New Accountant - advises against income splitting New Accountant - advises against income splitting
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    Default New Accountant - advises against income splitting

    Hi

    Just binned my old accountant for a new one. The new one have advised me against paying my wife a salary something which my old accountant advised me to do.

    Any advice? or Thoughts?

    thanks

  2. #2

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    Are they a contractor specialist? One of the well known names or ones in our Recommended Accountants sticky. Am guessing with the advice they've given you they aren't a specialist?

    100's of threads on this, most of which say it's OK to pay a reasonable amount based on her contribution to the company. Paying her 15k for doing absolutely nothing is most likely going to be challenged. You need to be paying her about what you would pay someone unrelated to you to stay clean.

    https://www.google.co.uk/search?q=pa...hrome&ie=UTF-8

    Did they say absolutely not or did they say no because she's a higher earner already and it's not efficient?
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    Hi

    the new accountant is one of the ones recommended in the thread that was why i went for them plus the use of freeagent.

    Thanks

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    They basically said that they advise not to do this. She has no other earnings and I was paying minimum earnings to be tax efficient

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    Quote Originally Posted by redman View Post
    They basically said that they advise not to do this. She has no other earnings and I was paying minimum earnings to be tax efficient
    Interesting. First time I think I've heard of an accountant saying this so dunno sorry.

    Maybe show them the thread I've linked. Also a lot of articles about it on the Web so you could dig those out and then ask them to detail exactly why they give that advice. Maybe it's out of their risk appetite.
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    Hang on a minute, let's think about this...

    I'm with the accountant. You don't pay people a salary for doing nothing. That comes under the modern heading of unacceptable avoidance. You can only pay someone proportionate to the work they do for the company.

    But you can give them shares, and hence dividends, to grant them income and to use up their personal tax allowances. Your spouse - especially a non-earning one - shares the business risk so divis are entirely appropriate.
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    Quote Originally Posted by malvolio View Post
    Hang on a minute, let's think about this...

    I'm with the accountant. You don't pay people a salary for doing nothing. That comes under the modern heading of unacceptable avoidance. You can only pay someone proportionate to the work they do for the company.

    But you can give them shares, and hence dividends, to grant them income and to use up their personal tax allowances. Your spouse - especially a non-earning one - shares the business risk so divis are entirely appropriate.
    He could say she is doing admin work :
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    Paying a salary isn’t income splitting really. You can pay your spouse a salary if it’s justifiable, which means she is doing something and the salary isn’t excessive.

    The better route would be to make her a shareholder and pay her dividends. Your accountants should be advising you on the best setup.

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    Thanks for the comments, currently I don't pay her an excessive amount at all and she is a shareholder. I think the accountant is a risk adverse and will talk to them. i am not too worried either way but your are correct this is interesting

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    Quote Originally Posted by redman View Post
    Thanks for the comments, currently I don't pay her an excessive amount at all and she is a shareholder. I think the accountant is a risk adverse and will talk to them. i am not too worried either way but your are correct this is interesting
    If she is also a director with no employment contract, there will be no need to justify the level of her salary. If she is not, then the salary she receives will just need to be justified at a level appropriate for the amount of work she does for the company and at a market rate.

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