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Alex J.
Alex J., Solicitor
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Experience:  Solicitors 2 years plus PQE
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I am employed by a Limited Company of which my wife is also

Resolved Question:

I am employed by a Limited Company of which my wife is also an employee and Director. At the moment I receive a salary that allows me to keep my state pension live, as does my wife. In addition, dividends are split 10% to me and 90% to my wife.
Our turnover is around £70,000 / annum, of which my wife generates around 75%. We have been advised by the accountant to rearrange the dividends on a 50 / 50 basis. However, we need a commercial justification to satisfy HMRC that we are not avoiding tax.
My contribution to the company is that I keep everything running including admin tasks, ensuring tax, VAT and PAYE bills are paid, completing the monthly paperwork and managing payroll, buying equipment and maintaining our computer network including software purchasing and hardware setup and purchase. In addition, I work as a freelance trainer and teacher. It's my wife's contention that I facilitate her ability to undertake contracts as I effectively run the business.
Would this be a valid commercial argument?
Submitted: 1 year ago.
Category: Law
Expert:  Alex J. replied 1 year ago.
Hi, Thank you for your question and welcome. My name is ***** ***** I will assist you. How are the shares in the company split? Kind regards AJ
Customer: replied 1 year ago.
At the moment they are split 10% to me and 90% to my wife. This original split was made in 2013 when I first joined the company. My wife thought it would be prudent for me to have a share in the profits that are an outright gift with full access to funds.
Customer: replied 1 year ago.
It's been recommended by the company accountant to make the split 50/50 and we are concerned to make a valid commercial argument as detailed in the original question.
Expert:  Alex J. replied 1 year ago.
Thank you. If you transferred 40% of the shares into your name then you would be entitled to 50% of the dividends and there would be no need for a commercial justification. The only problem is you would notionally have to pay for the shares or at least register their value on a stock transfer form - this would lead to a Stamp Duty charge at 0.5% of the value. Has your accountant suggested what your wife could notionally charge you for 40% of the shares? Kind regards AJ
Customer: replied 1 year ago.
No. There has been no suggestion of a charge at present as we have not got beyond the planning stage yet. The accountant has recommended we get legal advice - particularly with reference to a commercial justification- before proceeding.
Expert:  Alex J. replied 1 year ago.
Hi, Thank you. If your partner sells the shares to you, you would not need any other justification as you would own the shares and therefore the right to the future dividend stream. If your wife sells you the shares and they cost more than £1000 you will pay a 0.5% stamp duty charge. You could notionally register it as a transfer of shares, but just owe your wife the money as a debt. As a starting point as the accountant what the lowest price he would be prepared to justify on a stock transfer form?
Alex J., Solicitor
Category: Law
Satisfied Customers: 3608
Experience: Solicitors 2 years plus PQE
Alex J. and other Law Specialists are ready to help you
Customer: replied 1 year ago.
That's great. Thanks.
Expert:  Alex J. replied 1 year ago.
If I can assist any further please do not hesitate contact me. Kind regards AJ

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