Director of ltd co advice please 🙏🏻

[Pinklady18]

My husband and I separated last year, I am an employed director of his ltd company and a 50% shareholder, he is currently paying the mortgage and all the bills as long as I remain a director. I have no idea with regards to tax etc, it obviously saves him money by using my name. My question is, can I still be a director once we divorce? I would like to divorce him ASAP but i can’t afford to do this if I am not longer able to be a director as he won’t pay for things?? Hope this makes sense
Thanks for reading

So if you've been a 50% shareholder for 10 years, did the company declare a dividend for any/all of these years and did you receive it?

You really need to educate yourself about this.

Yes we have been

Clearly I am trying to educate myself in what is obviously a difficult situation.

That is completely not how it works. He does not get “wages” into the company. He invoices for work which gets paid in. Out of that comes any costs, his salary and your salary, taxes and fees and then dividends can be paid from what is left. If you are a 50% shareholder you should be getting the same in terms of dividends as him. Are you?

I think OP is probably just not familiar with the lingo and said 'wages' meaning 'the money given in return for work done'.

You should have been receiving a dividend statement (as well, obviously, the dividend itself) every time a dividend is declared, possibly month or quarterly. You would have been completing a self-assessment tax return every year in order to pay your tax on the dividend income. Have you seen/signed a tax return?

If you've been doing no work in return for the wages this could be scrutinised by HMRC - this should not be happening. (It's fine to receive the dividend - not that you are, apparently - as that's based on the shares that you hold, not work that you do).

He is a broker working through a network his wages are paid to the network who take a % for his compliance etc then his wages are paid into the ltd company from then he pays me etc and that’s all I’ve ever received, any dividends received I have not had, he has but his and my money were one of the same when we lived together. When I asked about them he basically said that if he has to allocate tax that way so I got dividends he would not be able to afford to maintain the mortgage and bills and we would therefore need to sell our home.

This is the first year self assessment form has been required from me, which is why I will be now receiving any relevant paperwork. When I asked the accountant why I needed one this year he said the following

A self assessment is required as you have income from the Ltd company in the form of salary and dividends. For the last tax year there is an additional dividend tax and therefore income of this type needs to now be reported on a self assessment.

He gives me a £1000 a month, I have just asked him if this is my wages and he said no it’s child maintenance,

You should look on the companies house website and ensure you are not a director. I would not take his word for it. As someone has said further up as a director you have responsibilities and you could end up personally liable in some circumstances.

As equal shareholders if he receives a dividend you must also receive a dividend.

I’m not sure whether it your naivety or whether something is dodgy, but neither is good!

How do you get the £1000 a month? From him or from the company’s bank account?

If from the company and/or it’s subject to tax it’s can’t be child maintenance!

From his personal account

So where is your salary?

And your dividends?

OP - you can check your status here.

beta.companieshouse.gov.uk

This makes me very nervous for you OP as he seems to treat you like a child just doling out money rather than giving you an adult explanation. This comment especially makes me worried "he has to allocate tax that way so I got dividends he would not be able to afford to maintain the mortgage and bills and we would therefore need to sell our home". He's basically telling you not to question anything or you'll lose your home. It comes across very strongly that he's not being honest with you. I don't know whether it's because he thinks you won't understand (this is clearly a new area for you) and he's taking the easy/lazy option and not bothering to explain, or if his dealings aren't entirely above board or something in between.

It seems that you may have been fine with him managing the finances while you were together but this needs to change now you're separated. You need to make sure you're being fairly given what you and your DC are entitled to.

If you are a shareholder, you are entitled to dividends (as often as the company has declared them). These need to be reported on your tax return. I would ask to see the accounts for the Ltd company going back 10 years and get someone who understands finance/accounting to look at them and explain them to you.

You also need to find out if you are being given a wage or not i.e. is the money you receive a dividend (i.e. you're a shareholder) and/or are you listed as a salaried employee of the company. If this money is coming from his personal account, that is not a dividend or a salary. It should be coming from the company account if it is a dividend or a salary.

Don't panic.

1. This accountant is probably right. There were major changes to the taxation of dividends recently and even just this year the amount tax free from dividends is going down |i think from £5000 a year to £2000 under changes to tax law so it may well be right this it the first year you have had to complete a tax return. Do not approve the tax return before 31 Jan unless you are entirely happy with the figures on it.

1. Go today on to this website beta.companieshouse.gov.uk/ which is the Government's website and type in the exact name of the company there. Then look at and ideally print out what you see on the link. It wil confirm if you were ever a director (never believe a word you are told by a divorcing spouse of course). Then look at the company last filed accounts which will be on there.

1. It is not a good thing you have never been a director as it means you will have no say in a company in which you own half the shares, get much less information about it and have less say during the divorce in relation to running of the company. However it is as it is if you are not a director and just a shareholder.

1. If the main family income is from the company then on divorce when money gets very very tight even if you get a new full time job, you both need to keep income up as much as possible for the good of the family so still using both your single person allowances in taking money out of the company makes sense. However paying money as dividends rather than a salary under PAYE is not as useful as it was because of recent tax changes so best you both take advice on this. It sounds like you are some kind of employee too and yet your wages are paid not from the company's account but your husband's which is surprising. Are you under PAYE and do you get pay slips?