New Limited for spouse contracting?

[mongle]

Hi,

I have been contracting for last few years via a Ltd where i hold 51% and my partner 49%. I am a director while she is CS with no pay. Now, she wants to go contract as well. What are the pros/cons for doing this as part of the same Ltd as against starting a new one? Thanks.

[malvolio]

Hi,

I have been contracting for last few years via a Ltd where i hold 51% and my partner 49%. I am a director while she is CS with no pay. Now, she wants to go contract as well. What are the pros/cons for doing this as part of the same Ltd as against starting a new one? Thanks.

Two schools of thought here:

1. Why not, it helps with IR35 and keeps the book-keeping simple.

2. You will get divorced in the next six months and she'll take the company.



Personally I see no reason not to, but the general advice seems to be to keep the two separate, especially if you are in different trades.

[northernladuk]

I think the personal choice is going to be the decider here. The costs of running two are minimal, accountant, company charges, set up costs etc etc. Not really enough to be using cost savings as a real decider for me. I would be setting up a separate company to keep the affairs and complexity apart. I am sure you never plan to split but we have a post running here already about a divorce and certainly isn't the first one we have seen.

She is also new so may not fancy it long term etc so you shut the company rather than buggering about with share allocations and so on. If it looks like a long term situation then you can combine if you wish but having two to start gives you extra outs later.

[stek]

Also depending on rates - two incomes added together might take you off FRS if you're on it.

[mongle]

Cheers for all the inputs.. i am convinced to go via a separate Ltd.. though not because i expect to be a free man soon

I thought that having more than one consultant makes it look less of a one (wo)man band.. but maybe not..

I think the following inputs from above are the pros for separate Ltd:
It helps with IR35 and keeps the book-keeping simple.
No buggering about with share allocations and so on
Two incomes added together might take you off FRS

I do not see any cons other than the £100 odd extra a month for accounting..

I suppose its better to retain the 51/49 in each Ltd as it is? Plus are there any extra costs in winding down 2 Ltds as opposed to one?

Thanks..

[northernladuk]

Sorry for being dim here but how does it help IR35 when it is on a contract by contract basis? Might help avoid an investigation as you tick an extra box in the Business Entity Tests so avoid being picked on I guess. Is that what you mean?

[kevpuk]

Separate co is the way to go....
Not least because of the FRS (including additional 1% 'saving' in year 1) but also keeps things nice and silo'd. With regards to IR35, if you are in similar lines of work, why not see if you can occasionally work for each other's co? Perhaps the odd short gig, or even a substitution.....

[Scrag Meister]

I suppose its better to retain the 51/49 in each Ltd as it is? Plus are there any extra costs in winding down 2 Ltds as opposed to one?

Thanks..

I guess that depends on if you want to allocated according to income earned.

Are you each bringing in the same amount?

Then again you are happy for her to have 49% when earning nothing, so I presume 49% when she is earning is ok.

[Martin at NixonWilliams]

My view is that unless there is a genuine commercial reason for working through the business together, keep them separate. I agree with each of the cons already listed on this thread.

I suppose its better to retain the 51/49 in each Ltd as it is? Plus are there any extra costs in winding down 2 Ltds as opposed to one?

To answer the above:

- The best and most appropriate share split depends on a number of factors but, broadly speaking, if you are both going to be higher rate tax payers just have shares in your respective companies. If one is not going to be a higher rate taxpayer you could give that person additional shares in the second company.

As man and wife there shouldn't be an issue in doing this but my advice is to decide on a split that suits you and keep it that way. The reason I suggest this is because where an income shifting challenge may arise, HMRC would have a better argument towards there being a right to income if multiple transfers are being made and the underlying reason for the transfers is to obtain a tax advantage, as there is a clearer expectation that dividends will be paid.

- Winding down two companies is unlikely to cost you much more than one depending on the fees your accountant charges. However, if you require a formal liquidation (this can give you a considerable tax saving on winding up) for two companies this could be quite costly as they typcially range between £1,000 - £3,000.