Contractors’ Questions: Can my PSC have multiple shareholders?

Contractor’s Question: Can I have multiple shareholders in my new limited company?

Expert’s Answer: In a word, yes. To form a limited company, you must appoint at least one director and one shareholder – and many new business owners choose to take on both roles simultaneously. However, it is also possible to name other shareholders at incorporation or further down the line.

Two key considerations here are:

  • The new £5,000 tax-free allowance on dividends, which came into effect this financial year (2016- 17). Using this allowance to set up a class of shares for a partner that isn’t already in receipt of other dividends will give them an extra £5,000 of tax-free income.
  • Inter-spousal exemption. Under this rule, contractors that are married or in a civil partnership can bypass the capital gains tax usually associated with the transfer of shares to a third party. Moreover, you can transfer shares as often as you wish in order to maximise your tax planning.

Please note, the information I have provided above is of a general nature only – you should seek appropriate professional advice tailored to your full circumstances before you proceed or take any action.

The expert was Bivek Sharma, head of KPMG Small Business Accounting Services, which offers contractors a full accounting service, including a quarterly business review with a KMPG consultant.