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Close company dividend payments question

We (self and wife) run small Ltd. company, originally it was created for me to use as a computer contractor which I did from 1987 to 2000 or so. My wife now does freelance training and consultancy through the company.

Our shareholdings are split 60% to me and 40% to my wife.

We want to take a fair amount of money out of the company as a dividend this year. Does this have to be split in the same ratio as the shareholdings - i.e. if we take £10000 out of the company as a dividend does it have to be paid £6000 to me and £4000 to my wife?

IR35 and paragraph whatever it is are not an issue for us at the moment. My wife's work is multiple contracts for a wide variety of different clients quite a few of which are fixed price.

We actually want to pay all the dividend to my wife as I have a full time job and any more earnings would all be taxed at 40%.

Reply to
usenet
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Yes - you pay a dividend of x / share. He who has most shares gets most most dividend.

If you are not happy with that then switch your shareholdings around beforehand. Transfer of shares between husband and wife I believe is not chargeable.

Reply to
Tony Lewis

Yes. You have to declare a dividend of £X per share, and this implies your share of the payout must be in proportion to the shareholding. One way round it is to have different classes of share, in which case you could declare a dividend of £X per A share and £Y per B share, but you'd first have to arrange for (say) you to have all the A shares and her to have all the B shares, and then let X=0.

Another possibility is for you to transfer all your shares to your wife as a gift before declaring the dividend.

Actually only 25%. You could just get the company to pay her a salary. Sure, there'd be some tax and NI to pay, but there'd be NCDT on the dividends anyway, wouldn't there?

Reply to
Ronald Raygun

OK, thanks, we'll transfer the shares then. There don't seem to be any big problems with doing that.

The company does already pay her a salary, it keeps her NIC contributions 'full' apart from anything else. However it's easier to pay a fixed salary and use dividends to pay the 'peaks and troughs' in the companies earnings.

Reply to
usenet

Another option could be a dividend waiver - possibly by Deed. IR often look closely at such transactions.

Reply to
Doug Ramage

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