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Sam, Accountant
Category: Tax
Satisfied Customers: 14192
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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My wife currently gets £108.15 per week employment and support

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My wife currently gets £108.15 per week employment and support allowance and also DLA, as she has MS. I am setting up a ltd company and was hoping to have her as a shareholder so I could pay dividends. I was hoping to pay her a wage also. This ltd company I am setting up is for a consultancy that I will be doing for 1 year onl, then reverting back to employee status. It is IR35 compliant but I will only be doing it for 1 year. Can you advise if her benefits will be affected if I pay her a wage and dividend? Would she have to declare her benefits on a self assessment, an does HMRC cross reference benefits with dvidiends/wages.



Thanks for your question. My name is XXXXX XXXXX I am one of the UK tax experts here on Just Answer.


101 a week and this constitutes more than 16 hours work a week, then this will affect her Employment and Support Allowance, plus she will need to get permission from the DWP to under permitted work. Yes this benefit will have to be reported on self assessment.


Disability Living allowance is not affected by work, so this will not need to be reported.



Now onto the consultancy work, if you only have one client then you cannot set up as a limited company as it will be in breach of the IR35 legislation, and you should in fact be employed as an employee with this company for whom you plan to offer this work.


But if you will offer this consultancy to many clients, then if you wish to pay your wife a wage she cannot be a shareholder of that company, she will need to be a director or employee - and again this will affect her benefits as advised above. And this would need to be reported to the DWP for the Employment and Support Allowance - and this will affect her benefits - as she then will have to be paid SSP - from you the company - or from the local DWP if she has insufficient wage/National Insurance contributions (which will be the case)


Please advise what you are asking when you refer to HMRC cross referencing the benefits.



Let me know if you wish any clarification on the advise given.


Thanks Sam

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Customer: replied 4 years ago.

Can you let me know what you mean by '101 a week and this constitutes more than 16 hours work a week'.

Would it be possible to pay her a dividend as a shareholder without paying her a wage then? I assume if I did this then I would have to do a self assessment for her and include the dividends in the self assessment, along with her employment support allowance payments. Would the HMRC contact DWP to advise about these other earnings (cross reference) or would it be my responsibility to inform them? How else would DWP find out?




A person in receipt of employment support allowance will lose employment and support allowance if they work more than 16 hours a week OR earns more than £101 a week.

But ANY work, that is less than these thresholds has to be agreed to by the DWP

Yes as a director she can be paid a dividend rather than salary,but this still affects the employment and support allowance position. And I will further advise that directors who are paid dividends often find, that they are investigated ore closely - to substantiate what has said to be received, as many use it as a smoke screen to cover p what they might actually be paid,

Information is shared between departments - so yes they do cross reference, but this cannot be relied upon in the place of your wife supplying the correct information herself to each relevant department