WWYD DH lending money again

[KatieMorag]

Dh has a long hiistory of lending our money to mostly family and friends without agreeing this with me first. Sometimes it gets paid back , sometimes not. We've had many many rows about this. He promises faithfully that he won't do it again. Then he does

Usually he lends money to his family. I don't mind if (a) we can afford it ( b) we get it back and ( c) we agree it between us. Sometimes we give money to family too, on the same conditions. This is because we are fortunate to be better off than most of our siblings.

About 10 years ago he borrowed £10,000 to lend to his sister. She never repaid it and it took us years to pay off the loan.

Last year he gave her £1,000 because she said she was in debt and couldn't pay her bills. She then took the money and went to Australia for a months holiday.

Earlier this year he lent a large sum of money to a colleague. By large I mean what I earn in a year. Today I discovered by accident that he's now lent this person another £10k.

I am so angry and Upset I can't even talk to him. It's not just the money, it's the lies , the deception and the broken promises. I don't know what to do.

[mummytime]

Sorry but your accountant is wrong you can own the business 50-50 even though you do less work. You just shouldn't draw the same salary if he does far more work than you. You should get equal dividends.
Please get legal and financial advice.

I am worried you will end up not only with no money and no college fund but also jointly liable for debts run up by him, especially those due to the tax man.

[WhereYouLeftIt]

Well business can be owned by different people than those who work for it surely? I do not see any reason why you could not 100% own the business (and therefore be the one making decisions and controlling the money) and your husband being an employee, albeit one whose work contributes a great deal to the income of the business.

[LeandarBear]

I would ask how to make the loan to the colleague a legally binding loan.

[fiventhree]

mummytime is quite right.

[summersunsomethingsbegun]

Get legal and financial advice.

I would also recommend marriage counselling. This behaviour is NOT NORMAL and it is putting an enormous strain on your marriage. It suggests he doesn't respect you as a person, because he puts his compulsive need to be nice and help others over you and your family.

[summersunsomethingsbegun]

Also what kind of business do you run and do you ever tender or pitch for contracts? Because they can ask to see that you're financially solvent and this would be a BIIIIG warning.

[ScarletWomanoftheVillage]

'We have a financial controller too who is not involved in this.'

Is the financial controller doing their job properly?

No one really seems to have any financial control here. Sounds like a dangerous way to run a business.

[MNsFavouriateManHater]

your financial controller has no control over company finances ?

what ??

has he/she been "lent" a vast sum of money to look the other way or something ?

[Houseofplain]

Indeed mummy....which is why I said find a shit hot accountant. As let's be honest the accountant and controller aren't doing their jobs....if this is happening.

So if when the shit hits the fan. She's going to need a very, very food professional to argue her corner if say...her signatures been forged on loans etc. Worse case scenario.

I've just got a really horrible feeling. That men who are like this never, ever change and when you scratch the surface it's like opening a can of worms.

Fraud/siphoned money/undeclared loans, etc

[needsomeperspective]

I work in banking and you absolutely need to get a signing authority matrix put in place. This would be an absolute deal breaker for me.

[CinnabarRed]

I can't emphasis this enough, and apologies in advance for shouting but DO NOT TRUST YOUR ACCOUNTANT. You have been given incorrect advice on the ownership of your company, either through incompetence or something worse.

Rightly or wrongly (wrongly in my view, and the House of Lords, and almost every external commenatator), back in the mid-1990's HMRC got very concerned income-splitting in husband-and-wife companies. They thought it was unfair that income that would otherwise be taxed on the spouse who runs the company is instead given to the other spouse, to allow the other spouse to take advantage of their personal allowance and basic rate tax band that would otherwise be wasted.

It was, and still is, standard practice for spouses to split ownership of their family business 50:50 between them. The lower earning spouse in a marriage/civil partnership is then given a minor admin role in the H&W company, pay her (it's almost always the wife) salary up to the annual exemption and then pay her dividends up to the limit of the basic rate band.

The 2007 decision of the House of Lords in the Arctic Systems case (it's correct name is Jones v Garnett) in relation to such planning was decided in favour of the taxpayer.

In this case, Mrs Jones was employed for five hours a week by the company, received a commensurate salary for this of an amount roughly equal to her annual exempt amount and received dividends of an amount which used up her basic rate band. HMRC argued that Mrs Jones' dividends should be assessed on Mr Jones. The House of Lords (and before them the High Court and the Court of Appeal) disagreed. They said her dividend income was just that - her income as defined by the legal ownership of the business - and should not be taxable on Mr Jones.

Immediately after the House of Lords decision, the Government announced that it intended to amend the tax legislation in this regard to stop what it regards as unacceptable tax planning. The Government proposals were published in December 2007, but a March 2008 Budget announcement stated that any changes would be deferred . To date, no further proposals have been announced by the government. I work in tax policy and I haven't heard even a whisper that there are any plans to dust off these proposals.

There is no tax reason whatsoever why your company's ownership structure should have been changed from 50:50 to 70:30. You have been robbed an asset which you were fully and legally entitled to.

I don't know why you were given such glaringly incorrect advice, but something isn't right here, and you would do well to start digging. I am very concerned for your financial position.

[CinnabarRed]

And even if Arctic Systems legislation had been introduced, which it wasn't, it wouldn't have applied to you.

You as a family have ploughed your time and effort into your company. The 50:50 ownership was agreed between you and your DH given what you as a family had sacrificed to get where you are.

And you actually work in the business, in a 'proper' role worth £60k, not some tiny admin role worth your personal allowance of less than £8k.

Why the hell shouldn't you own equal shares?

And it's rubbish to say that your DH brings in all the business so should own the lion's share of it. By that argument, only the sales director in a company should own shares in it - not the investors, or the CEO, or the finance director, or the HR director, etc etc.

[MNsFavouriteManHater]

Good God...is this poor lady possibly in even deeper shit than was first thought ?

and and [anger]

OP...you must take independent advice now

pay for it, and pay for it well. It could mean the difference between making sure your financial security is saved or you being swindled out of what is rightfully yours

[MNsFavouriteManHater]

[Houseofplain]

She probably is yes. I know I've said it before. But IME. Men this irresponsible, thoughtless,deceitful and careless with money.

Usually have MUCH more going on, shady dealings, even outright fraud. So considering, I would be very surprised if all is as it seems.

Which is why she really needs good advice, someone who will really dig, through the company finances amd her own personal finances. To check for siphoned money, dodgy loans, fraud, things "she has signed for".

[DoItOnce]

Calm down, calm down!

yes OP should be careful, and yes she should be pissed off and yes she should stop this from happening again but it is a bit of a leap to think she married Bernard Madoff

[Houseofplain]

Not really she's already been done out of her fair share fot he business

[CinnabarRed]

TBF, we don't know that the DH was behind the advice to transfer her 20% shareholding to him. Maybe the accountant is incompetent; maybe s/he was trying to bill for work that wasn't actually needed.

Either way, the accountant isn't worth whatever they're paying him/her. My advice is the same as Houseofplain's - get a good accountant on the case to look at all aspects of the company's finances. And make sure to get dual signing authority for all bank transactions over, say, £500.

[KatieMorag]

Hi everyone, thanks for your advice. I met the accountant today. He was very shocked and a bit embarassed I think, as he knew about soem of the things that have been going on but had been told that I had agreed.

Long meeting and I'm still taking it in but we discussed

I will be present at all future meetings with accountant unless he hears from me that I don't need to be there

None of the loans etc are illegal or fraudulent, except one small transaction related to Dhs brother. As this only took place a few months ago we can sort that out

First ( large) loan to emplyee is legal. We will now get a written agreement in place re repayment schedule which meets requirements of S455 tax. Also discussed security for this

We will draw up operation standard and agree at board meeting. This will cover recruitment, spending limits, capital expenditure and loans.

We will look at banking arrangements and update our authority matrix.

We discussed shareholding and accountant admits his advice was wrong. I will consider asking DH to reinstate to previous 50:50

Second loan to employee-accountant will speak to Dh and ensure this is also legal and put through our loan account , as that's the most tax efficient

[KatieMorag]

Other questions that people asked:

I've been through our bank accounts and there are no suspicious transitions. No reason at this point to appoint a forensics accountant I think

I now have Dhs pin no so I can stop him making any transactions at all if necessary.

When I said financial controller wasn't involved, I meant she has not received any loan and was not party to the decision

The business is not in debt, we have good margins and healthy cash flow. ( that's probably why Dh thinks it's ok to lend the money)

We do tender for contracts and all our paperwork is in excellent shape.

Thanks again for all your expert advice and especially to those who sent me PMs. I'm concentrating on the business stuff right now and will deal with marital issues later

[Houseofplain]

None of them are illegal or fraudulent except one it's still one. You trust your account to be telling the truth? When he's been turning a blind eye?

I dot think an accountant who has been so flawed can be trusted tbh. I really, really think you should have sought independent advice...

[perfumedlife]

I'm with Houseofplain here op. How can a paid accountant give out such serious, wrong advice and just carry on? I know you have enough on your plate and won't want to change all that over right now, but I still think another professional eye cast over the business would be a worthwhile expense.

[ladyWordy]

A very thorough, methodical and useful meeting, from the sound of it.
Good for you, KatieM, for getting right in there in less than 24 hours? your determination to take action is probably one of the reasons your business is so successful.

[KatieMorag]

The accountant didn't know about the dodgy transaction. Now he knows he will fix it .

The advice he gave re share allocation was correct at the time but the case was appealed.

He's embarrassed because he took Dhs word that I agreed to stuff and I didn't even know about it. That was foolish but not illegal and he won't do that again. Like me I guess he trusted DH

However I will consider getting another accountant if necessary.

[KatieMorag]

Thanks lady wordy, I m still in shock really, now need to implement all these matters.

I can't really process what this means about our relationship. I know that the advice here is all true, Dh does consider me and my opinions less important. People in his job are often very arrogant as clients pay a lot for and defer to , their opinion. Although he pays lips service to my role in the business and the family, deep down money talks.

And the comments about his childhood are spot on-he had a very dysfunctional family and is still seeking the approval of others because he didn't get it from his ( now dead) parents .

It really helps to write everything down here. Somehow it doesn't seem real when it's just in my head IYSWIM. Too easy to believe that I'm just overreacting etc