Joint/Shared Ltd Co.

[formant]

So, I'm still on my first ever contract and I'm only part-time, so I work through an umbrella, as I'm not really losing out (much) financially that way. There is also a chance I'll be made perm by ClientCo. at the end of this twelve month gig, so I hadn't really thought too much about going Ltd so far. Additionally my working practices may be deemed to be within IR35, although I haven't had that properly reviewed yet due to just settling for an umbrella.
But sometime this summer my hours are likely to be upped to full-time, at which point (IR35 permitting) I'd be better off going Ltd. So it's been at the back of my mind.

My other half (we're not yet married but will be from August in case that makes a difference), is a permie lecturer at the local university, but has had is own consultancy in the past (an LLP with a business partner he now no longer deals with, so that's all closed down). He's now about to win a big consultancy contract on his own, which he could take on through the university (and get bought out of his teaching commitments for a while) or do outside of his official working hours and keep the cash (his employer and future client are fine with either option, so nothing dodgy about him choosing to go solo on this). The latter is obviously quite a bit more attractive to us.

So his initial thought was to set up another LLP (as that's what he's familiar with), but I brought up the idea of going Ltd together, so that he can do his consultancy work through what would be our joint Ltd, and I can eventually move my contract away from the umbrella.

Now, I've googled a bit and read the newbie guides, but didn't really find much on actually sharing a Limited Company. Of course lots of people have their spouses as stakeholders, directors, "employees" (on paper anyway) and so forth, but this would I guess be a bit different as we'd both be bringing in money, rather than one pretending to be working for the other.

So, before I take all this to an accountant (which of course I plan to do), I was just wondering if anyone here is properly sharing a Limited Company and whether that's a convenient thing to do (I'm sort of hoping this means we could share an accountant and reduce insurance costs for example).

Also, would I be right in assuming that for my other half it would be pointless to draw a salary, as he wouldn't get any of that tax free due to his continuing permie pay? So he'd be better taking dividends only, right? Just wondering. Having been active on here for a few months now, I'm less confused about my own situation - I suppose I'd be going for the low salary + dividend option myself, which seems to be what most of you are doing.

So anyway - sound feasible? Or silly idea? Any input appreciated!

[Jessica@WhiteFieldTax]

Its possible, and some people do it. Issues:

~ setting shareholdings at correct % if you want to stream your own income to each other. Not so much of a problem if you are happy to pool it and draw in the most efficient way.

~ what happens if you split up?

~ protecting his revenue stream from risk on yours; his seems more IR35 secure at first glance, yours maybe less so, and if there was an assessment its against the company and any assets in it. Not so much of a problem if you maximise interim dividends in year, as funds at risk are lower.

~ most accountants on fixed price packages would want to charge a premium for two active contractors.

~ combined turnover may deny you the benefit of the flat rate scheme for vat.

~ yes, no salary for partner sounds sensible if he has PAYE income elsewhere.

Otherwise, if you go into it with you eyes open is a possibility.

[formant]

Its possible, and some people do it. Issues:

~ setting shareholdings at correct % if you want to stream your own income to each other. Not so much of a problem if you are happy to pool it and draw in the most efficient way.

We already pool our earnings (and outgoings) in a joint account privately, so that's not something I'd be worried about.

~ what happens if you split up?

Unlikely in the very near future, but certainly a valid point.
We don't intend to leave a lot of money in the company for any length of time. We'd probably dissolve the Ltd and start up again on our own in that event.

~ protecting his revenue stream from risk on yours; his seems more IR35 secure at first glance, yours maybe less so, and if there was an assessment its against the company and any assets in it. Not so much of a problem if you maximise interim dividends in year, as funds at risk are lower.

Good point about the risk. He'd be the only one working through the Ltd from the start. I'd need to have my IR35 risk assessed properly before I route my contract through the joint Ltd.

~ most accountants on fixed price packages would want to charge a premium for two active contractors.

Oh, I'm happy with a premium, I was just hoping we wouldn't pay twice as much. Also, his work will be sporadic, mine is likely to be ongoing (not sure if that makes a difference to an accountant's workload).

~ combined turnover may deny you the benefit of the flat rate scheme for vat.

Oooh, VAT - hadn't looked at that at all yet. Cheers for bringing that up.

~ yes, no salary for partner sounds sensible if he has PAYE income elsewhere.

Otherwise, if you go into it with you eyes open is a possibility.

Thanks, Jessica, that was super helpful. I suppose my thinking was that it might be less of an administrative burden to run just one Ltd between the two of us. If, contrary to my expectations, it's likely to be more of a hassle, we should probably each make our own arrangements.

[Jessica@WhiteFieldTax]

Glad to have helped. It works for some couples, not others. Good luck either way!

Cost wise, to give you a guide, we charge a 20% uplift on normal fees for two persons sharing a company. Don't know if there is any sector wide consensus on that though, but gives you something to bear mind when talking to your accountant.

[IR35FanClub]

One thing to bear in mind - according to the new points based business entity test - if you have another employee who brings in at least 25% of the turnover you get an extra 35 points, putting you into the low risk category for IR35.

http://www.hmrc.gov.uk/ir35/guidance.pdf

If you wanted to "follow the rules" and avoid paying as much tax - that would mean one of you has to be director and the other employee as the fee earner can't be a director or partner - and take a small smallish salary. However the other one would end up in the 40% tax bracket.

Maybe worth playing with a few figures and see what your accountant thinks. The total with both of you on minimum salary and 1 taking divs up to the 40% bracket would be somewhere around £45k IIRC. If you can "Survive" on that and build up a warchest, you'll be sorted.

Personally I think the guidance from HMRC is another example how creating more and more rules just adds more loopholes.

[Wanderer]

One thing to bear in mind - according to the new points based business entity test - if you have another employee who brings in at least 25% of the turnover you get an extra 35 points, putting you into the low risk category for IR35.

http://www.hmrc.gov.uk/ir35/guidance.pdf

Hmmm. So, if you had a spouse who was IR35 caught then they could trade through your company (not being a director or shareholder) and you could pay them a salary. If their income was greater than 25% of the company turnover then you have a low risk IR35 status....

Personally I think the guidance from HMRC is another example how creating more and more rules just adds more loopholes.

Yep.