Inland Revenue versus Arctic Systems

[Simeon]

This question is directed at ltd companies of husband and wife with one share each. The Inland revenue are appealing to the House of Lords after an initial court decision to stop the spouse recieving 50% of dividends where the spouse is not an active member of the company thus lowering the 40% tax payment for the active member.

My accountant has given me three options as I am in this position.

1. Continue as I am and keep one share each between myself and my wife

2. Buy her share back and take the 40% hit

3. Increase the shares to three with myself holding two and take a partial hit. This would also reduce the risk of investigation.

What are other companies doing if anything at all?

Do you have any other options?

[silverdaler]

hi Simeon,

i am in a similar position as i own 50% of our company.However , i work full time for us. Despite this, my Accountant has advised me to do a few things. Firstly, write out and keep a copy of my Job description (how annoying that my other half doesnt need to !), secondly clock in and out, thirdly claim my mileage, and lastly, hold Directors meetings which contain information which proves my involvement in the Business. Its VERY annoying and VERY sexist i feel, but i have started to do it anyway.

Hope this helps you or anyone else.

Good luck !

[Simeon]

Hi Silverdaler

Please do not be offended but when you say you work full time, is that for the company or your other half runs the company and you have your own full time job?

Either way thanks for the tips, doing the mileage but not the directors meetings.

[silverdaler]

no. i only work for our company. i used to work part time for us, part time someone else, but (foolishly) gave the other one up !

[silverdaler]

by the way, why not Directors meetings. You dont have to actually hold them. just type some up !!!!!!

[fairline]

In the same position as you but wife does not work. However, firstly no guarantee at all that IR will win at appeal.

Secondly, if they do win, they may only set a precedent going forward.

Thirdly, have some involvemnent that can be justified at key stages of the business. ie interviewing new staff members, or dealing with the accountnants. Actions that can be confirmed by third parties should the need arise.