Setting up a Company? be a Director or not?

[JonSmile]

Hi

I am new to this contracting lark (well about to be as I am about to hand in notice on Perm job and jump into the Contract market).

I have been reading all sorts of useful (and some confusing) threads.

My first question (and I expect there will be more ) is about setting up my company - I thought I had the paperwork all ready to go and then some contractor (with lots of useful advice after 5 pints - he also mentioned something about getting a receipt ) went and confused me again.

So the question is (yes I know I waffle but have finally got to it) is it better to set up your uk ltd company and just be an employee - i.e. have your (trusted) inlaws as the 2 directors and me any my wife as the 2 shareholders, both as employess - me doing the main breadwinning and the wife doing the accounts / tax / invoice / paperwork / walking the dog etc)?

What are the benefits of not being directors? Are there any? And what happens when one of the directors leaves this mortal world?

Cheers in advance

Jon

[TheFaQQer]

Hi

I am new to this contracting lark (well about to be as I am about to hand in notice on Perm job and jump into the Contract market).

I have been reading all sorts of useful (and some confusing) threads.

My first question (and I expect there will be more ) is about setting up my company - I thought I had the paperwork all ready to go and then some contractor (with lots of useful advice after 5 pints - he also mentioned something about getting a receipt ) went and confused me again.

So the question is (yes I know I waffle but have finally got to it) is it better to set up your uk ltd company and just be an employee - i.e. have your (trusted) inlaws as the 2 directors and me any my wife as the 2 shareholders, both as employess - me doing the main breadwinning and the wife doing the accounts / tax / invoice / paperwork / walking the dog etc)?

What are the benefits of not being directors? Are there any? And what happens when one of the directors leaves this mortal world?

Cheers in advance

Jon

Try searching the fora and see what you find...

Typical setup seems to be have you as a director, employee and sole shareholder. Have someone you trust / pay to be company secretary.

[JonSmile]

cheers for the reply but..

Thanks for taking the time to reply but I am still left with some questions.

I have already searched the forum (and googled all over the place) and can't see anything to make me jump one way or the other.

If I go down the route you suggest, why would I want to be the only shareholder? If I set up my wife as a share holder as well would that not mean twice the amount to declare (£38k x2?) before we get caguht in having to pay tax? We could both also be employees (me contracting and wife accounts / paperwork / general dogsbody (hoping she does not read this post ))?

Also if I set up my 2 year old as a shareholder could she earn tax free dividends?

But mainly I still cannot see the reason / benefit I would get by not being a director?

Cheers
Jon

[Bluebird]

Thanks for taking the time to reply but I am still left with some questions.

I have already searched the forum (and googled all over the place) and can't see anything to make me jump one way or the other.

If I go down the route you suggest, why would I want to be the only shareholder? If I set up my wife as a share holder as well would that not mean twice the amount to declare (£38k x2?) before we get caguht in having to pay tax? We could both also be employees (me contracting and wife accounts / paperwork / general dogsbody (hoping she does not read this post ))?

Also if I set up my 2 year old as a shareholder could she earn tax free dividends?

But mainly I still cannot see the reason / benefit I would get by not being a director?

Cheers
Jon

Every time you declare a dividend - the directors do this at a Directors Meeting, it needs to be recorded in the minutes and signed etc.
If you in-laws are happy to do this, then ok.
I for one think it's better to have "control" over my company

[timh]

I'm slightly confused by this.. Is not being a director some kind of defence against S660A, or something?

[TheFaQQer]

If I go down the route you suggest, why would I want to be the only shareholder? If I set up my wife as a share holder as well would that not mean twice the amount to declare (£38k x2?) before we get caguht in having to pay tax? We could both also be employees (me contracting and wife accounts / paperwork / general dogsbody (hoping she does not read this post ))?

Also if I set up my 2 year old as a shareholder could she earn tax free dividends?

But mainly I still cannot see the reason / benefit I would get by not being a director?

If you are doing roughly equal work, then you can probably get away with being shareholders. However, if HMRC see this as a way of you moving your income to your wife to avoid paying tax on your income, then they will tax you as if you had earned it all anyway - this applies particularly for children.

Read up on the Arctic case, S660A and maybe talk to an accountant about this. There is nothing to stop you having all the family own shares in the company, but until the HoL rules on Arctic, this is generally a bad thing to do - maybe once it's resolved then reconsider.

[Bluebird]

If you are doing roughly equal work, then you can probably get away with being shareholders. However, if HMRC see this as a way of you moving your income to your wife to avoid paying tax on your income, then they will tax you as if you had earned it all anyway - this applies particularly for children.

Read up on the Arctic case, S660A and maybe talk to an accountant about this. There is nothing to stop you having all the family own shares in the company, but until the HoL rules on Arctic, this is generally a bad thing to do - maybe once it's resolved then reconsider.

ahhh, but Artic is not a test case, so you can't use that.

By the way, I own shares in a couple of companies but do naff all work for them, does that mean somebody who works for these companies will pay the tax for me ?

[JonSmile]

so my contractor mate was talking...

Guys

Cheers for the replies - was reading the s660 case after my earlier post.

I would therefore assume (and I have learnt the dangers of making assumptions) that there is no real benefit of having the inlaws as directors.

So would the best (safe) option be to set up xyz.ltd with myself and wife as equal voting shareholders and both employess being paid about £5k a year as salary and then divideneds (1/4ly)?

I would then ask about expenses / vat and all that good jazz, but will save it for later / after more forum reading!

Cheers

Jon