Husband - Wife shareholding

**Robot** · 22 April 2007, 20:19

Originally posted by texto

Hello People,

I've just setup a new company and sorting out the shareholding. I've read all about Arctic Systems case and I want to ask if 75/25 split is reasonable or not? My accountant thinks I should retain 100% shareholding but I'm willing to take a chance.

Or should I go a bit higher like 90/10 split? If she manages bank account dividends, invoices etc - what do you think?

Texto

Sounds like you will be ‘on all fours’ with Artic Systems and IF they go down so will you eventually, regardless of the Per% split.

Your Accountant is giving you good advice to be the sole shareholder but like all good advice you can choose to ignore it.

**Sockpuppet** · 22 April 2007, 20:20

Originally posted by texto

My accountant thinks I should retain 100% shareholding but I'm willing to take a chance.

So you're going against the advice of a qualified professional?

Take the chance but looking after invoices doesnt qualify for payments via dividends in my view. Its purely for tax evasion purposes in which case I hope HMRC find you.

Dont get me wrong I have nothing wrong with people running thier own business and arranging their manners in a tax efficent way but there is no need to take the piss and give your wife a 25% stake of the dividends for an hours paperwork a month.

Not a flame, just blatently ovbious why you are doing it and HMRC will see it that way as well.

**VectraMan** · 22 April 2007, 20:32

Originally posted by Sockpuppet

Not a flame, just blatently ovbious why you are doing it and HMRC will see it that way as well.

I agree - there's reasonable arguments on both sides of IR35, but there aren't for S660 IMO. What you're doing is for no other reason than tax avoidance.

**texto** · 22 April 2007, 21:37

Thanks for your replies.

What exactly warrants a shareholding in the company? It seems, she has to bring in some money to the company before she can be a shareholder.

I know of so many contractors at my client site doing the same thing that I feel odd being a 100% shareholder. And there was this guy who had SJD as his accountant and they advised him to go with the higher shareholding (85/15 or something like that)

So you all are 100% shareholders of your limited companies?

**malvolio** · 22 April 2007, 22:04

It's worth remembering that Diana Jones bought and paid for her share in the company and that she did some real work for the company in the early years. Nevertheless the key point at issue in Arctic is whether or not a wife actively contributes to the creation and operation of a company merely by virtue of being married to her husband. When separate taxation for man and wife was introduced in the late 70s it was admitted in the HoC by the Chancellor (Lamont) that some would use it to mitigate their tax bill by sharing of allowances, and that this was both expected and acceptable. Gay Gordon has deliberately chosen to ignore that precedent and to re-interpret a 70 year old law for his own mendacious purposes.

S660 has a valid application, as per the original case that caused it to be set up, but it is not and must not be applicable to a straightforward sharing of income between man and wife, least of all on the basis that Geoff and Diana Jones are doing it on the advice of their accountant and in line with HMG's own interpretation of the rules.

Until the appeal is heard and the result announced sometime this year, the options are to keep a 100% shareholding, or to use whatever split seems appropriate (50/50 is perfectly reasoanble) and state on your SA form that you are doing so in anticipation of the Arctic result being upheld. You can't then be penalised, but you might be asked for back tax if we lose the appeal: along with around 2.5 million other taxpayers...

Go with your accountant's advice, it seems good to me.

**THEPUMA** · 23 April 2007, 07:53

If you do want your wife to have a shareholding, do not issue the share to her. Issue it to yourself and then gift it to her. You may then be able to use the exemption previously in s660 available to spouses.

Geoff and Diana Jones were unable to argue that this applied to their case as she was allotted shares. Therefore, even if they lose, you could argue that your circumstances are different.

I don't think there is anything wrong with paying your wife a dividend if you are aware of the risks. Bear in mond that the taxpayer is currently "winning" the case.

If it were me, and I wanted to draw more than I personally could tax free, I would pay the balance to my wife (assuming she weren't a higher rate taxpayer). There is certainly a chance that any dividend paid to her won't be taxable whereas any dividend paid to you (over the HRT threshold) is certainly going to be taxable. So what's the downside?

**NewBoy** · 23 April 2007, 07:54

Keep your wife out of it...trust me...business and personal...keep it seperate...

Yes she may help with your filing etc...but she does that as a helpful wife, in the same way that you may help her with her CV as a helpful husband...it doesn't mean you get a slice of her salary when she lands a new job thanks to your help

**malvolio** · 23 April 2007, 08:35

Originally posted by THEPUMA

Geoff and Diana Jones were unable to argue that this applied to their case as she was allotted shares. Therefore, even if they lose, you could argue that your circumstances are different

No, Diana paid cash for her share at the time the company was set up.

Then again, when I went freelance my wife used her savings to fund my first month or so until I had a cashflow. I could have rewarded that with a shareholding (no point in our case, since she is already over the 40% band on her own) - would that have been a gift, a reward for an early investment or her buying a shareholding at the cost of a few hundred pounds of support? Or do you assume that monney she earned and saved independently of me is somehow mine for me to spend at will?

S660 is intended not to apply to married couples, since it was drafted in the 30s when wives' finances were not legally separate from husbands. It has not been redrafted to match changes in that position, but that has not stopped HMRC stretching the legal definitions assumed by the Act to try and prove their case. Losing the appeal will be a major disaster for a lot of people, and will also be a travesty of justice.

**meridian** · 23 April 2007, 08:46

Originally posted by NewBoy

Keep your wife out of it...trust me...business and personal...keep it seperate...

Yes she may help with your filing etc...but she does that as a helpful wife, in the same way that you may help her with her CV as a helpful husband...it doesn't mean you get a slice of her salary when she lands a new job thanks to your help

Well, no, it's not separate. Husband and wife finances have been considerd to be joint for taxation purposes up until the 70's, and even now under certain circumstances are still considered to be joint - the anomalous situation here is that G Brown doesn't want me to choose to give half of my company to my wife while we're together, but the courts are more than willing to give half of it to her if we were to split up.

Husband - Wife shareholding