I'm in the process of setting a limited company to start working as a contractor. I'm planning to set my wife (who is not working) as a shareholder. I have briefly browsed all the issues surrounding the spouse as shareholder and have also gone through the summary of Arctic case. I understand that the standard market practice is to split the shareholding 1:1.
In my case, I have already earned a sizable amount for this tax year from full-time employment (which I have now left to start the limited company). It appears that the most optimal way to structure my limited company business would be to split the shares between me (as Director & shareholder) and my wife (as other shareholder) in 1:9 ratio. Given my income to date and tax year split for the term of my new contract, I am better off passing as much dividend income to my wife (under the tax threshold) so that my overall income is not taxed punitively in the higher tax bracket.
Is 1:9 shareholding safely justifiable (to HMRC), given that I will be the director who would be providing the services? If not, what share distribution can be justified readily – 25:75, 30:70, 40:60?
Is 50:50 sacrosanct? Is 1:9 split stretching it too far? What split would you recommend?
----
Currently I can provide evidence for my wife's involvement in setting up the company (i.e. doing the research on set up etc.) and helping me with admin duties. At latter point of time when she gets back to work (as locum doctor), she might be earning more in contract than me. From the latter point of view (which is a long-term scenario), is it justified to give her higher share percentage? Can husband and wife contract for different services through the same limited company?
----
Thanks
In my case, I have already earned a sizable amount for this tax year from full-time employment (which I have now left to start the limited company). It appears that the most optimal way to structure my limited company business would be to split the shares between me (as Director & shareholder) and my wife (as other shareholder) in 1:9 ratio. Given my income to date and tax year split for the term of my new contract, I am better off passing as much dividend income to my wife (under the tax threshold) so that my overall income is not taxed punitively in the higher tax bracket.
Is 1:9 shareholding safely justifiable (to HMRC), given that I will be the director who would be providing the services? If not, what share distribution can be justified readily – 25:75, 30:70, 40:60?
Is 50:50 sacrosanct? Is 1:9 split stretching it too far? What split would you recommend?
----
Currently I can provide evidence for my wife's involvement in setting up the company (i.e. doing the research on set up etc.) and helping me with admin duties. At latter point of time when she gets back to work (as locum doctor), she might be earning more in contract than me. From the latter point of view (which is a long-term scenario), is it justified to give her higher share percentage? Can husband and wife contract for different services through the same limited company?
----
Thanks
Comment