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Husband and wife contracting through same Ltd Co. - good or bad idea?

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    Husband and wife contracting through same Ltd Co. - good or bad idea?

    I'm sure this question must have been asked before, but I could find anything so here goes...

    My wife and I are both considering going into contracting. We work in completely different fields (I'm an engineer, she's a freelance teacher/trainer).

    Would it be sensible and most cost effective for us to work through a single joint Limited Company, or best to keep things separate?

    TIA

    (PS I have contracted before but then foolishly went permie and shut down my company. My wife has never done it.)

    #2
    This has been covered on here before, and I seem to recall the advice is to have seperate companies. You are not engaged in the same type of business and you will earn diferent amounts of money for the company which will cause problems with HMRC if you take dividends, for example.
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      #3
      Originally posted by Zippy View Post
      This has been covered on here before, and I seem to recall the advice is to have seperate companies. You are not engaged in the same type of business and you will earn diferent amounts of money for the company which will cause problems with HMRC if you take dividends, for example.
      Not sure how Taking Dividends will cause problems..... You take Divvis from the Company profit based on your shareholding (nothing to do with how the company earns profit).... You (should) declare this on your Tax SA...... just as if you had shares in IBM and they pay a Divvi
      ie You own about 0.00001% of IBM so you only get a little bit - but the principal is the same.
      You can own shares in as many companies as you like.

      Your Salaries might be different.... but most Contractors only pay "Minimum" Salary - so that doesn't matter.

      Your individual Contracts may well generate (vastly) different incomes - but that doesn't strictly affect how the company pays you.....

      Although that doesn't mean I am suggesting you should do it under one company.... there are other factors as well.
      If you do it under one company (which breaks the VAT turnover) then you will both have to Charge VAT on your invoices....
      If you do it under 2 its possible that neither will.....

      The "Income Shifting" stuff that was going on might have made a difference as well... but I think thats died a death....
      others may know more on that front......

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        #4
        Originally posted by Zippy View Post
        you will earn diferent amounts of money for the company which will cause problems with HMRC if you take dividends, for example.
        How you want to manage your marital finances is very much a personal decision but here's my take on it.

        Lots of businesses split income between husband (who works) and wife (who doesn't work), it's not a problem though there have been rumblings for years about shutting down this business structure. Surely a couple would have a much stronger case for legitimate incomesplitting/sharing if they both earned substantial income for the company? It may also make IR35 more difficult to enforce against either of you because you are now more of a proper business employing two people who work for different clients. Trading through one company would also save on accountants fees (about a grand a year?) and the pain of administering two companies.

        With a single LTD and presuming that the OP and spouse operate a joint bank account they could just split the share ownership (and therefore dividend) 50/50 at a company level regardless of fees invoiced by each person. The money could then be paid into a joint account without regard to "who earned what". If they want to split the money into personal accounts from the joint one, then that's a private matter and nothing to do with the tax man.

        However, as seperate companies, you may both be able to take advantage of the flat rate VAT scheme which should more than offset the accountancy fees...
        Free advice and opinions - refunds are available if you are not 100% satisfied.

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          #5
          Originally posted by Zippy View Post
          This has been covered on here before, and I seem to recall the advice is to have seperate companies. You are not engaged in the same type of business and you will earn diferent amounts of money for the company which will cause problems with HMRC if you take dividends, for example.
          LOL! What a load of rubbish!

          Have you never had a 'decent' accountant?

          I ran two totally different businesses through the same limited co I had. My wife and I worked in the same business in one instance and I worked separately in the other business.

          Didnt cause a scrap of problem with the accountant nor HMRC.
          I couldn't give two fornicators! Yes, really!

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            #6
            Originally posted by BolshieBastard View Post
            Have you never had a 'decent' accountant?
            What... one that tells you what you are paying them to hear...

            In this scenario, there is at least the possibility that HMRC would view the situation as evidence that the Ltd company is a purely artificial structure - not truly in business on it's own account.

            That doesn't mean they will - clearly they didn't in your case, but if your accountant didn't at least caution you about this, then I'd hardly call them 'decent'.

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              #7
              I don't think that there is anything to stop you doing this. However, I personally would not.

              I agree with centurian in what he says he thinks how Hector will look at it, because that is how I look at it too. It is not a diversified business; it just looks the a scheme to minimise on fees.

              I would keep them separate. Better to explain what each is doing to bank managers, Hector's minions and your own brain.
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                #8
                The main problem I can see with you having one limited company is how your industries work.

                I presume you have checked that using a limited company is the right way to freelance in your respective industries? I've been told by some people that they have to work completely as a freelancer/sole trader or in a partnership.

                Also I can see is nothing wrong with running two income streams under the same company if one of you could realistically do fee earning work on both areas and does. (Still makes life hard though)

                However if you can't then keep them separate for reasons given above.
                "You’re just a bad memory who doesn’t know when to go away" JR

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                  #9
                  Thanks for the various comments - there's clearly a split of opinion in this area.

                  I'll be asking the advice of my prospective accountant so it will be interesting to see which way he turns.

                  Comment


                    #10
                    I really can't see see why HMRC would object, it doesn't reduce the amount of tax paid in any way. The only real saving would be accountants' fees and the number of stupid forms you have to fill in. Only having to do one set of books/accounts is not to be sneezed at.

                    If you do go that way note that you can have different classes of shares that can pay different dividends to reflect your individual earnings. More flexibility than adjusting numbers of ordinary shares.
                    Last edited by xoggoth; 9 May 2010, 19:22.
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