Appointing my wife as a director

[MisterMusty]

I've recently incorporated a company that has not yet begun trading and, after being told by my accountant that it would be sensible to appoint my wife as a director, I am considering issuing her a share so we both have 1 share (there are no other directors). I'm starting the business with our personal funds which I consider to be equally my wife's and mine, and she has had considerable input into the creation of the business generally such as offering advice on marketing. We're expecting our first child soon though so she may well have an insignificant role in the future.

I am aware that HMRC can sometimes take issue with such arrangements so I wanted to ask any experts in the forum whether appointing my wife could risk any serious liabilities for either of us. I gather it's a relatively common practice but want to be sure it's not a dodgy practice, or might otherwise expose us to undue risk (Obviously I mean legally - I'm aware of the obvious potential hazards if our relationship were to break down in the future)

thanks a lot for any advice.

 

[Zeno]

It will likely not be an issue. HMRC's recent attempts at challenging this have not gone well for them.

You are right to think that the biggest danger is likely the wife running off with the milkman.

May be wise to get a shareholder's agreement drawn up to be on the safe side.

 

[Johnny77]

What are the benifits of having your wife as a director?
Is it worth the risk and potential problems?

 

[Zeno]

What are the benifits of having your wife as a director?
Is it worth the risk and potential problems?

Depending on the director's service contract you make her sign then she could be legally obliged to make you tea.

Assuming you mean tax advantages, it is usually a question of making use of the partners allowances by paying dividends via the shareholding. It is the shareholding that is important in this respect.

I

 

[elaine@cheapaccounting]

Discuss with your accountant as he / she will know the tax advantages - basically with equal shareholding you can split divs as so reduce / eliminate higher rate tax depending on circs.

HMRC are trying to write some law to disallow this (known as income splitting) but they haven't worked out how to do it yet!

 

[taxattack]

I've recently incorporated a company that has not yet begun trading and, after being told by my accountant that it would be sensible to appoint my wife as a director, I am considering issuing her a share so we both have 1 share (there are no other directors). I'm starting the business with our personal funds which I consider to be equally my wife's and mine, and she has had considerable input into the creation of the business generally such as offering advice on marketing. We're expecting our first child soon though so she may well have an insignificant role in the future.

I am aware that HMRC can sometimes take issue with such arrangements so I wanted to ask any experts in the forum whether appointing my wife could risk any serious liabilities for either of us. I gather it's a relatively common practice but want to be sure it's not a dodgy practice, or might otherwise expose us to undue risk (Obviously I mean legally - I'm aware of the obvious potential hazards if our relationship were to break down in the future)

thanks a lot for any advice.

It's not clear whether you are aware of the distinction (apologies if you are) between shareholders (who own the company and are entitled to dividends) and directors (who are "office-holders" and subject to Paye on remuneration from the company).

Depending on the circumstances it may be appropriate for your wife to be one or the other or both (or neither!)

If as you describe she is to have a role as adviser and no doubt from time to time administrator, there is no problem in her being rewarded for those roles as a director. And there is no problem at present with her owning some of the ordinary shares, like yourself.

Chris

 

[Ray Coman]

You may also wish to consider setting up a salary sacrifice scheme to pay childcare costs through the company. If you are both directors then there may be scope to receive two lots of the weekly childcare benefit