1 or 2 shareholders

**Gonzo** · 31 January 2009, 10:31

Originally posted by djhns View Post

Hi guys

Not sure if this question has been posted previously.

From a limited company perspective, are there any additional tax or filing requirments of having more than one shareholder? I am due to lodge my first limited company return shortly.

i'm currently the only shareholder and director of my limited company, however, am thinking of making my wife the 2nd director of my company in order to share the dividends therefore reducing my personal tax liability since i need to prepare annual SAs. My wife is already a permanent employee eslewhere and also in the higher income bracket but does not need to lodge a SA.

Any help would be appreciated.

many thanks.

3 things.

1. There are no additional tax or filing requirements if there is more than one director. Other than advising Companies House when a director is appointed or resigns of course.

2. Directors are not paid dividends. The shareholders are.

3. If your wife is already in the higher rate tax band then giving her anything to do with your company will not reduce the tax at all, so don't do it. That's my opinion, I am not an Accountant etc etc.

EDIT: I have now noticed the title of the thread, you are actually talking about making wifie a shareholder rather than a director. Point 3 still stands.

**djhns** · 31 January 2009, 11:15

Thanks Gonzo for taking time to respond.... Sorry... my mistake!

What i mean to say was, " Am thinking of making my wife a 2nd SHAREHOLDER to share the dividends" instead of 2nd director.

I will still be the only director being paid a basic salary.

a) Will your Answers 1 and 2 now change?

b) Now with regard to your answer 3. Am i correct to say that, my wife's tax liability should still remain the same even after receiving the dividends as she does not have to prepare SAs, she does not have to declare the dividends? My tax liability will reduce as i will receive less dividends. Therefore reducing the tax liabilites together. I guess there will be no change in overall tax liablity if my wife also prepares a SA.

anyone?

thanks

**slackbloke** · 31 January 2009, 22:38

Originally posted by djhns View Post

Thanks Gonzo for taking time to respond.... Sorry... my mistake!

What i mean to say was, " Am thinking of making my wife a 2nd SHAREHOLDER to share the dividends" instead of 2nd director.

I will still be the only director being paid a basic salary.

a) Will your Answers 1 and 2 now change?

b) Now with regard to your answer 3. Am i correct to say that, my wife's tax liability should still remain the same even after receiving the dividends as she does not have to prepare SAs, she does not have to declare the dividends? My tax liability will reduce as i will receive less dividends. Therefore reducing the tax liabilites together. I guess there will be no change in overall tax liablity if my wife also prepares a SA.

anyone?

thanks

Your assumptions are not correct. Your wife's tax liability will increase as she will be liable for the tax on dividend as she is already a higher rate taxpayer. The tax rate on the dividend would be 22% (32% - 10% tax credit). By receiving income (from the dividends) that should be taxed, you wife will become liable to complete SA, this is the HMRC definition that applies :

'people who have other untaxed income and the tax due on it cannot be collected though a PAYE tax code'

I can't see any scenario where your joint tax liability can be reduced based on the info you have provided. Your joint tax liability will either be the same or be higher. There is no point using a second shareholder unless they are already below the higher rate threshold.

**slackbloke** · 31 January 2009, 22:43

Correction - higher rate dividend tax is 22.5%

**Gonzo** · 31 January 2009, 23:05

Originally posted by djhns View Post

Thanks Gonzo for taking time to respond.... Sorry... my mistake!

What i mean to say was, " Am thinking of making my wife a 2nd SHAREHOLDER to share the dividends" instead of 2nd director.

I will still be the only director being paid a basic salary.

a) Will your Answers 1 and 2 now change?

b) Now with regard to your answer 3. Am i correct to say that, my wife's tax liability should still remain the same even after receiving the dividends as she does not have to prepare SAs, she does not have to declare the dividends? My tax liability will reduce as i will receive less dividends. Therefore reducing the tax liabilites together. I guess there will be no change in overall tax liablity if my wife also prepares a SA.

anyone?

thanks

I agree with slackbloke.

a) Not really. As far as your Company is concerned, it just means that there are two shareholders rather than one. The shareholders are listed on the Annual Return to Companies House, when dividends are declared there will be two payments rather than one.

I am not sure on this but you might have to actually hold and minute an Annual General Meeting, but that shouldn't be to onerous unless you and the Mrs fall out.

b) This assumption is not correct. Your wife would receive any dividends with a tax credit attached. This tax credit satisfies the tax due for a basic rate tax payer, but a higher rate tax payer will have to pay more and complete the Self Assessment form to declare it.

It sounds like that in your case you will not be able to save any tax by transferring ownership to your Wife because she is already a higher rate tax payer.

This does work where the partner is a basic rate tax payer, or non tax payer. The government don't like it and refer to it as "income splitting", but it is still perfectly valid (for the moment).

**djhns** · 1 February 2009, 22:04

Thanks everyone for your responses!

Much appreciated!

1 or 2 shareholders