AIBU to expect DP to cover the extra personal tax I'm liable for after become a 'director' of his company??

[bedknobs72]

I'm a SAHM.
DP gives me £300 a month for personal expenses and I get a little income from my old flat that I rent out. DP has a small business and has made me a co director as he said it would be more tax efficient. There is a joint account for big family expenses

I always do a Self-Assessment because of the rental income. However, now that DP has made me a director of his company I have to declare my 'earnings' and the dividends that I 'get' from his business. This means my tax bill is twice as much. I'm happy to pay the tax owed for the flat income as I had factored that in and put it aside from the flat income. But I sort of think DP should be paying the excess that I am now due because I've been put down as a director of his business? AIBU? DP certainly things so. He hit the roof when I suggested it seemed unfair and said that if 'he' paid for it I would be getting more money than him as he also only has a about £300 a month left over for personal expenses.

Still seems not quite right to me though. I agreed to being Director as I thought it would bring the overall tax bill for the business/him down. I didn't think I would start having to pay tax on the money I was suddenly 'earning' . I have had no change in the monthly money I get and I don't have any more for the increased tax bill.

I said to DP that if he had a job rather than owned a business ( and brought in the equivalent amount of money) he wouldn't be expecting me to give him half of his PAYE tax figure.

DP is getting very angry that I'm even suggesting that this seems unfair.

AIBU??

I genuinely don't know if I'm being a selfish unreasonable cow or if I have a point?

OP the bit I struggle with in all of this is that neither of you seem to be financially committed to this relationship. I know, everyone is different but when I read "his rent" "my rent" "his deposit" "my £300 a month" it just all sounds a bit separate and almost as if you are both hanging back from commitment. I understand everyone plans for a "rainy day" when their relationship might end but the two of you are dug in for hurricanes. All a bit bizarre from my point of view. I jointly run a business with my DH. I know what our strategy is, our client base, we have clearly defined roles and I know what is coming in and going out. If after 10 years this business isn't making enough to wash its own face then its not a business, its a hobby. a bit like those people who make crafting tat on the internet. Of course the next big thing is round the corner - it always will be. Some people just aren't cut out to run their own business, they are basically fiscally incompetent and this has nothing to do with the business itself but the running of it. Becoming a director just enabled him to live the lie for longer and kicked the can down the road.

Most relationship fail due to money. Yours is going to be no different and is heading in that direction at a pace. if you want this relationship to continue then the two of you HAVE to sit down with sheets of paper. write down all assets, income, earnings the lot. be completely and utterly transparent. look at the business accounts - really look at them. And come up with a 3 month plan of either x% growth or he stops. 10 years is long enough. and if both of you cant or wont do this, then your relationship might limp on for a few more years but essentially its over. sorry to sound so brutal but I do some voluntary business consultancy work and I see it time and again.

The £300 per month is less than half of the £8k salary you are paid though the company payroll which as you know has no tax due on it but eats up most of your personal allowance which has the effect of increasing the tax you owe on your rental income by as much as £1,700 all the while reducing the amount of tax he pays.

Stick that up his 'You should have known the £300 was gross!'

Do not let him away with this bullshit!!

OK, so you have some joint income (the business), some individual income (rent from flats) and possibly some savings. You are also contributing more to childcare and running household I assume if he's contributing more to business?

It's awkward maintaining separate finances when your contributions are in different ways like this.

IF you really want to maintain fairness of contribution, perhaps you could tot up contribution, where your line of business counts for you, savings in childcare counts for you, his line of business counts for him less an allowance for how much of his admin you're doing. (And if he's going to quibble about deposit on house, you can start totting up how much you subsidised him when you were earning too. ) Then both add in from individual earnings until you are both contributing the same and the total is enough to break even plus some joint savings for emergency costs.

Looking at the figures for this might be enough to make blatantly clear that it would be better for one or both of you to get a job.

Or you could agree rental income is family money too and go for fairness in terms of all bills paid then equal spending money. Might be simpler but you would need to be much more open with each other.

Either way if you are going to stay involved with his business at all you need to insist as a director that he sort out its dodgy accounting. Dividends paid out of post tax income.

Really think the best solution here is you get a job and he pull his weight with childcare round his business. You being at home when you could be working is costing the family way more than tax wriggles.

@mummymeister as a woman, mother of 3 and unmarried and without the knowledge that I have had and will continue to have family handouts I feel more financially vulnerable. I have saved hard all my life and have a small escape fund pot ( hoping it doesn't come to that) I don't want him to know about it because I don't want there to be the expectation that I should be 'dipping into it' I have no way of replenishing it. I feel quite strongly about it - that either means our relationship is doomed or I am being sensible ;-)

Hang on to that fund BedKnobs... he will not be left holding any babies or without something to fall back on and his attitude towards you as the mother of his children is currently not looking great.

He still won't address the situation properly and has just shouted "I've been bleeding him financially"

Well i hope this is opening your eyes to the abuse, OP cos you still sound far too passive and tolerant.
Out of your £28k annual income on paper - you only see £3,600 of this annually - and you don't care?
He takes around 44k out of the company in total - so where is this money being spent/going?
He's banking it all in his own accounts and all you get is 'pocket money'.

Given the huge difference in personal wealth and the bank of mum and dad, plus the fact that you're not married - why aren't you taking your personal finances more seriously?
Why can't you have your share paid into your own account and then handle the management yourself?
Have you asked him to show you the accounts and seen for yourself what's happening?

He's not thick or naive - he knows exactly how he's trying to fuck you over.
I've no doubt his wealthy parents will have also advised him on taxes/business etc.
He's also now trying to gaslight you with the "the £300 is gross" comment and "bleeding him dry".
He just doesn't care because this is what he's done all throughout his life - spend other people's money to prop up his lifestyle.
He's a spoilt rich boy who has typically spat his dummy out when you said 'no!'
I'd like to know how £3,600 out of 48k is bleeding him dry!

He is being financially abusive OP - you just don't want to see it.

I wouldn’t be happy about not seeing my salary and just receiving pocket money let alone the dividends issue. He strikes me as unreliable.

I'm not convinced it's financially abusive. He isn't getting all the money either as far as we know, it's going into joint account from which the bills are being paid. The problem is both partners are trying to ring fence their rental income and the business income going into joint account isn't actually enough to cover their costs.
Though I would say given the other signs of general incompetence, I'd want to take more control over the joint account and bills too. Is he doing things like shopping around for utilities?

I think it could be financially abusive, because he's massive increased the OP's outgoings without her actually realising this - in order to reduce his own . But it's his reaction to this that makes it look more on to the abusive side, yelling about her bleeding him dry, refusing to pay it, etc. By shifting 20k of dividends in to her name then her personal tax bill has increased by about £1350, plus whatever extra tax she now has to be on her rental income due to the salary munching her personal allowance. Given that she only receives £300 a month , he's expecting her to take a reduction in personal spends of over a third.

Just clocked that he said "you should have known the 300 was gross" - so from income of £3600 a year from the business, you're supposed to pay the tax attaching to £28k...And pay for god knows what else. It's a magic £300!

Except shifting things to be tax efficient was OP's idea I think she said? Hard to tell though on t'interwebs. He does sound incompetent and living in wishful thinking land generally even aside from how he's not considered it from OP's perspective. And possibly in a state of panic at how much of his own and his parents' money he's using to shore up business and family finances. He's living in cloud cuckoo land and that shouldn't be allowed to continue but he's still sinking a lot more of his "extra" income into the family than OP is. The problem is the non extra income simply isn't enough, however much he thinks it should be.

To me, it's a bit like she'd said "my credit rating is better than yours so can we take a card out in my name to cover X,Y,Z expense that you have coming up, it'll make us better off overall", they agree, and then he's expected her to make the repayments and just "know" that the money was meant to cover that too.

It's completely unfair yes; but given the other ways he's shown himself incompetent I'm not sure to what extent that's deliberate and to what extent just not understanding or thinking it through properly to connect beyond "my accountant says this saves us money".

From his perspective, he's getting out exactly what OP is getting out and is paying his own tax and putting extra money into the business and family account too. What he's not admitting or not seeing is that this is because his business isn't actually bringing in enough to support the family and that he may need to put a bit more effort into family to enable OP to work if they still both want to keep their rental incomes out of the family pot.

I don’t think it’s financially abusive on the info we have. He’s being paying money from the business into the joint account to pay for bills. He hasn’t accounted for tax on it though and now it’s all spent. It seems that you are both living way beyond your means. Also you need to get a grip on your financial affairs- both of you. It doesn’t seem like either of you know what’s going on financially with the business. If you were paid dividends unlawfully you would personally be liable to repay them (eg if HMRC wanted paid and the company was insolvent). It’s not sufficient to say you left it to someone else, you were paid the dividends and you would be liable to repay them.

Not trying to scare you but if you don’t understand the financial and tax position of the company, you should definitely not be a director.

I think you would be better to go back to a job where you would be financially secure.

OP this stinks for so many reasons. Former accountant here.

You have several problems to deal with here.

Firstly, the realisation that you are married to a giant man baby - at best. He’s clearly way out of his depth in trying to run the financial side of this business, relying on periodic top ups from mummy to do the grown up stuff like pay tax. This will not end well.

Even worse he’s nasty and turns on you when the pressure gets too much. Bleeding him dry indeed - I’d like five minutes to give him my opinion of that comment.

You have made yourself incredibly vulnerable by having three dependants (who you seem to have to do all the running around for) with this man, without the security of marriage and the rights that would give you. Even worse, you’ve given up well paid employment and the security of a pension scheme, to hitch your star to his caravan.

You’ve signed up to all sorts that you don’t understand and he is frankly having a laugh with his granting you a pittance of an allowance and no oversight of the financial affairs of the “business”.

This has to stop now. Because you love him you’ve trusted in him and his abilities for far too long, and I hope the scales are falling from your eyes.

As a minimum you need to go back to work three days a week. You both need the security of that income and you need your pension. The longer you leave it the harder it will be to get back if you need to. ( Trust me, this advice comes from personal experience). Either he must start taking responsibility for pick ups etc ( like a grown up) or you both need to pay for help, but if he won’t support you take a careful note of that fact.

If he doesn’t like it, well tough.

You need to stop blindly doing what he wants like his handmaiden, and start starring in the production of your own life . You also need to be looking out for the financial security of you and your children pronto.

Good luck my dear. 💐

I truly believe this isn't ( deliberately) financially abusive. It's a combination of him living in a bit of a dreamland about finances and truly believing that he'll be making more money 'next month'. I think because he's been self employed for so long ( over 12 years) he sees all money as 'gross' and that you have to have in the back of your head that you'll be scrabbling around trying 'find' the tax money at the end of the year. This has never been a major concern for him as he's always had pots here and there he can draw it from if necessary - and he just presumes it's the same for me..
From his perspective we are running this business together and he is taking out exactly the same as me yet he's putting in more from his personal funds so it irks him that I then expect him to pay for my tax that I'm now liable for as a result of 'helping' with his business. It seems the fact that I have been trying to help him bring in more money has made him think I am 'running the business' equally with him and therefore must suffer the losses with him...or something like that.

I've told him it's not a business just because it's now an Ltd. It's still just him freelancing ( and now my freelancing and giving him the money) To be a business it needs to growing and there needs to be a strategy and goals and targets and accountability. I don't want to be his business mentor though, or business partner.

The dividend thing is a bit worrying - we have an accountant so surely it can't be dodgy. I asked him about it and he insisted what he was doing was normally and he knew a lot about it from one of his previous businesses . He knows the income and outgoings and how much tax we are likely to pay and then pays out dividends as and when we are in profit after accounting for tax etc. It's not like the tax doesn't get paid.

If he knows how much tax should be paid and only pays out dividends after taking that in to account (so far so good!), then the corporation tax money should still be in the business account.

So why did he have to pay it from his personal account? Where has the money gone...

Agree with above and other posters. Him having to pay corporation tax out of personal savings is a huge red flag. Where has the money gone?

When I was a student many years ago a close relative of mine set me up, without my knowledge, up as director of their limited company. Apparently I lived a fine life on a nice salary and dividends (when they were really good)

Few years later when I came to try and set myself up as director I got loads of grief from unfiled returns, huge tax bills owing etc. I ended up having to report them for the lies and pocketing the cash as I was screwed if I didn’t

Please get advice and sort out your situation

why are you relying on and taking his word for it instead of seeing the facts with your own eyes or speaking to the accountant yourself?
This guy doesn't know - or is incapable of - even managing the basics of business finances.....

Call your accountant and check

At the end of the day it’s your life OP, but I can’t help but feel all these pots of money and different income streams is a bit of a dangerous way to live your life. I really think you need to go through your personal finances and get them clear. This is how many famous people end up bankrupt, they have a bit of a dip in their earnings, get a huge tax bill and it wipes them out.

Hi OP. Hope you’re ok. You come across as being intelligent, but perhaps slightly naive. Which is understandable as we all want to trust (and should be able to) what our partners are telling us. You know somethings wrong with the business and I am sure once you get down to it you will figure it out.
I think you were perhaps in a vulnerable place when you made the agreement: mental health, 3 kids, life isn’t easy and you sound to be juggling most of it yourself.
The best thing is though, you can now empower yourself moving forward. You can make decisions for yourself and look into things. You have been helping with his company and you have said you could even set your own little side business up. That’s fantastic! Not many of us have that ability.
You can get through this, just keep your eyes open

He is still lying though, £3,600 brings with it no tax, even if paid gross. The tax is due on the remaining £25,000 paid into the joint account so that is where the tax should come from.

The business should have accounted for the tax due before declaring dividends. If the business no longer has the cash to pay this, then either he has been taking extra cash out of the business illegally or the current year is performing so badly the cash has been spent with no money coming in. In either case, a 'going concern' review between the directors and the accountant is required.

You are a Director so Should have been involved in declaring dividends. You need to either take responsibility or give up directorship/shareholding.

OP as previously said

step 1 is to sit down and get familiar with the finances - you're a director, you should know

step 2 might be resigning that directorship

step 3 - you say you could have your own work with your client base. do that. don't tie it to the business. if you have to set up as your own ltd company, that's not time consuming at all.

Still not clear where your £300 pcm comes from.
Is it from the joint account - ie from your salary? (in which case tax/PAYE presumably already paid on it) or from his salary/dividend/savings - as a "gift"? In either case how can it be "gross"? Gross of what?

I think he's basically in a financial pickle with the business. You are Director so have both a right and a responsibility to sort it out.

Your own finances and the family ones sound equally precarious so tbh you need to stop being so passive and sort this out.