Contractor Ltd Co and divorce

[MPwannadecentincome]

Decision time for me - I need to work out whether to give 10% shareholding in my Ltd Co to the STBex.

Accountant advises that a minority shareholding should not raise eyebrows with HRMC, as STBex is not working giving approx 10% would keep her within her tax free allowance though some benefits would be affected. As a Higher Rate Tax Payer I would save tax.

Downside seems to be is that I would never get that 10% back so the liability remains forever, well at least until Ltd Co is closed down.

Any helpful advise from out there?

[BrilloPad]

Need more info. How long married? How many children? What assets are there and what did each party bring to the marriage?

Are you only giving her 10% of your company? What is the full financial settlement?

There are 3 parts to divorce. The seperation, the children and the finances. In general, the first two can be done yourselves but the finances are very complex and not to be taken lightly.

I have some advice - but need answers to the questions above first else its pure speculaton. This is A/L not general.

BTW sorry to hear about the divorce - upsetting.

[MPwannadecentincome]

Need more info. How long married? How many children? What assets are there and what did each party bring to the marriage?

Are you only giving her 10% of your company? What is the full financial settlement?

There are 3 parts to divorce. The seperation, the children and the finances. In general, the first two can be done yourselves but the finances are very complex and not to be taken lightly.

I have some advice - but need answers to the questions above first else its pure speculaton. This is A/L not general.

BTW sorry to hear about the divorce - upsetting.

Thanks for the kind words.

Financial settlement in negotiation stage prior to court in November. Ltd Co is new as I was on bench until last week after 3 years permie then got a good gig. Marriage is more than 15 years so solicitor has advised who put what in is no longer relevant as STBex "gave up her career to look after kids". She is fighting for house equity, there are no other significant assets except small pension fund and also pushing for more than minimum child maintenance (3 kids) as well as spousal maintenance. The only only strategy the solicitor has offered me is to trade assets vs maintenance, so if I lose out on the maintenance side it is more tax efficient for me to offer 10% of the Ltd Co (she has none now) as the dividends alone will save me £2,500 a year in higher rate tax.

I am trying to work out my options before discussing again with solicitor and accountant.

[Jessica@WhiteFieldTax]

Its a tempting strategy, but I'd be cautious. Not so much with HMRC, more the general legal aspects - her future and your company are then bound together, what happens when your income goes up or down, or you change direction.

If she is well advised her legal team will probably not bite in any event.

My - thankfully indirect - experiences of divorce and finances are that those who take it on the chin come out with sanity if nothing else.

[northernladuk]

Wouldn't you be in a situation where a non spouse would be a shareholder and fall foul of income splitting regs?

[IR35 Avoider]

An interesting technical question has occurred to me, though it may not be relevant to OP as it only applies to contractors whose working circumstances are an IR35-fail.

For the purposes of IR35 legislation, is an ex-wife "family"?

HMRC guidance indicates that a "partner" is "family", other than that I'm not sure where they specify what counts as "family."

If an ex-wife is not "family" then you could give her 100% of the company (with your interest in company contract income protected by employment contract) and the company would not be a caught intermediary for IR35-purposes, therefore IR35 could never apply, your working circumstances would be irrelevant.

[MPwannadecentincome]

Wouldn't you be in a situation where a non spouse would be a shareholder and fall foul of income splitting regs?

I asked accountant and they didn't seem to think it was a problem - or they misunderstood when I said "ex wife" but I have to do my own research of course.

[MPwannadecentincome]

Its a tempting strategy, but I'd be cautious. Not so much with HMRC, more the general legal aspects - her future and your company are then bound together, what happens when your income goes up or down, or you change direction.

If she is well advised her legal team will probably not bite in any event.

My - thankfully indirect - experiences of divorce and finances are that those who take it on the chin come out with sanity if nothing else.

Well even without her being a shareholder if my income goes up / down or I change direction her future is impacted, at least that is what I will get my lawyer to point out.

[MPwannadecentincome]

An interesting technical question has occurred to me, though it may not be relevant to OP as it only applies to contractors whose working circumstances are an IR35-fail.

For the purposes of IR35 legislation, is an ex-wife "family"?

HMRC guidance indicates that a "partner" is "family", other than that I'm not sure where they specify what counts as "family."

If an ex-wife is not "family" then you could give her 100% of the company (with your interest in company contract income protected by employment contract) and the company would not be a caught intermediary for IR35-purposes, therefore IR35 could never apply, your working circumstances would be irrelevant.

give her 100% - that means giving her full control of the company?

[BrilloPad]

Thanks for the kind words.

Financial settlement in negotiation stage prior to court in November. Ltd Co is new as I was on bench until last week after 3 years permie then got a good gig. Marriage is more than 15 years so solicitor has advised who put what in is no longer relevant as STBex "gave up her career to look after kids". She is fighting for house equity, there are no other significant assets except small pension fund and also pushing for more than minimum child maintenance (3 kids) as well as spousal maintenance. The only only strategy the solicitor has offered me is to trade assets vs maintenance, so if I lose out on the maintenance side it is more tax efficient for me to offer 10% of the Ltd Co (she has none now) as the dividends alone will save me £2,500 a year in higher rate tax.

I am trying to work out my options before discussing again with solicitor and accountant.

Wow! I am not too sure wha to say. I assume you are seeing the kids.

Is there any way of getting things back together? I think you are in a very weak position.

With a 10% share in your limited, if you went permie again or changed limited company she would have to go back to court. So I think she and her advisors are going to be very reluctant.

Personally I would seperate your affairs from her. Maybe think about keeping a share in house until kids are 18.

As soon as all kids are 5 she should be working.

When I got divorced I wanted us split as much as possible. I got house sold and us both moved to cheaper area. She put together no alternative plans so I got my way. Well she said I should live with my mother! The court has a duty to house you both and do a fair split while the kids are looked after.

You might try the "I want a house to have the kids half the week" routine.

One strategy you can try is just to stop working and dig your heels in. But unless you are not seeing the kids then please don't do that.

I would offer to chat to you by phone - but I find this all very upsetting. And I am becoming a social recluse anyway.

I think you do need to get lots more opinion. Have you been to a FNF(families need fathers - though I think they changed their name) meeting? You need to speak to others who have been in this position but not solicitors.