Shareholder advice

[Edisoneb]

Hi all, not sure if I’m posting in the correct place but we’ll see.

I’m director for a limited company, generally only pay myself a very low wage as I do have alternative employment and generally use the business as a way of saving and take it out in lump sums for holidays etc.

At the moment my partner is paid through the company as a subcontractor but looking at him coming on as a share holder for obvious tax reasons.

He would be as a different class as his wage would be different from my own as he would still be paid the rates from subcontracting, would it cause any problems our wages being completely different constantly?

Thanks

 

[Scalloway]

There is no obligation on a company to pay a director any particular salary.

Have you run the tax implications by your accountant and drawn up a shareholders agreement? These are the areas that are more likely to be sources of touble.

 

[Edisoneb]

There is no obligation on a company to pay a director any particular salary.

Have you run the tax implications by your accountant and drawn up a shareholders agreement? These are the areas that are more likely to be sources of touble.

Hi thanks for reply,

I’ve spoken briefly to my account about it over email just been toying with the idea however at the moment we’re paying 20% cis so it seems like the better option.
At the moments I basically pay myself what I need as I said then take it in a lump sum, obviously he would require a weekly wage for the work which is carried out usually around £800 a week but 20% of that is paid in CIS

Thanks

 

[Mr D]

Not uncommon for the director to be lower paid than other people employed in the company.

 

[Edisoneb]

Not uncommon for the director to be lower paid than other people employed in the company.

It wouldn’t always necessarily always be lower, as he would only still be paid for the work actually carried out and my pay is mainly taken in a lump sum once a year and depends on what the company has made, so it would always be different amounts that was my worry whether that would be a problem.

 

[Paul Norman]

There would be no issue at all about paying each of you different amounts. Right up until the time one, or both, of you decided to get the hump about it.

So whatever deal you strike, put it in writing. With a clear statement of what happens when your world's change and it becomes an issue.

 

[obscure]

....and my pay is mainly taken in a lump sum once a year and depends on what the company has made,

I assume this is paid as a dividend rather than just a lump sum salary payment?

 

[Edisoneb]

Yes sorry as a dividend as he will be, only his will be on a weekly basis

 

[Mr D]

Yes sorry as a dividend as he will be, only his will be on a weekly basis

Same dividend?

 

[Edisoneb]

Same dividend?

Lost me, we’ll both be paid as dividends however these will vary on a week to week basis.
It looks like it’s ok thanks for all the replies

 

[Mr D]

Lost me, we’ll both be paid as dividends however these will vary on a week to week basis.
It looks like it’s ok thanks for all the replies

Sorry, I mean say you have 50 shares each. You take your dividend annually and he takes the same total amount of dividend weekly?

 

[Newchodge]

Dividend is paid from available post tax profit. Declaring a dividend every week is not normal practice!

 

[Edisoneb]

Dividend is paid from available post tax profit. Declaring a dividend every week is not normal practice!

Really? How should I be paying myself, director, from the business? My accountant has never told me this

 

[Mr D]

Really? How should I be paying myself, director, from the business? My accountant has never told me this

As a director? Salary.
As a shareholder? Dividends.
Can be a mix of both for greatest tax & NI savings. Its really something your accountant should be able to discuss.

 

[KAC]

No longer in practice so not up to date with current legislation but consider what you are proposing should be discussed in detail with your accountant taking into consideration your own and your partner's tax position. The "gift"to him of dividend paying shares could have tax implications.

The company will still pay CIS tax if it does at present. The dividends paid are not a deduction from profits chargeable to tax so the corporation tax liability will increase. This is one of many articles online about the payment of regular dividends. You do need to have a directors' meeting to consider and minute whether there are sufficient distributed reserves to cover the dividend and you do need to draw up the correct paperwork every time a dividend is paid.

 

[Newchodge]

I’ve spoken briefly to my account about it over email just been toying with the idea however at the moment we’re paying 20% cis so it seems like the better option.

You might ask your accountant to explain CIS. Your company is not paying any CIS. Your company is deducting CIS from the payment invoiced by your sub-contractor and sending it to HMRC on the sub-contractor's behalf. That money will be offset against their tax liability at the end of the year.

 

[Chris Ashdown]

Get a new accountant who is up to date and get him to check over what you have been doing and a way forward, as what you have stated so far does not inspire confidence that you understand the financial implications of what you are proposing

 

[Newchodge]

Just re-read your first post. Having your partner become a shareholder is neither here nor there. Do you mean they are going to be an employee? If so, unless they are a director they have to be paid minimum wage, at least.

 

[Edisoneb]

Get a new accountant who is up to date and get him to check over what you have been doing and a way forward, as what you have stated so far does not inspire confidence that you understand the financial implications of what you are proposing

No I don’t unfortunately which is why I asked for some advice, just when I think I understand what I’m doing I find out I don’t...

 

[Mr D]

No I don’t unfortunately which is why I asked for some advice, just when I think I understand what I’m doing I find out I don’t...

Uk tax system is far from easy. One member claims it's the most complicated.
Seriously meet with an accountant - most have initial meeting free and go with someone who can work with you, who inspires confidence or who proves able to explain stuff.

 

[Edisoneb]

Had a meeting with my accountant, set up and on payroll now and leaving partner where he is at the moment till money grows and he can move onto payroll.

Thanks for all the help.

 

[Lisa Thomas]

Good luck.

If you are planing on your partner being issued with shares he should pay for them.

 

[scarlettSmith]

I just want to ask that dividend reinvestment is safe for long term investment or not.

 

[Scalloway]

I just want to ask that dividend reinvestment is safe for long term investment or not.

In your own company?