Can I make my spouse a director or pay them a salary if they do not really work in the company?

You can appoint a spouse as a director, but a salary is only deductible for corporation tax if it pays for real work at a level an unconnected person would be paid. HMRC's guidance says a deduction can be refused for any part that is not wholly and exclusively for the business, and the excess may be taxed on you instead or challenged under the settlements rules.

Three separate questions

People bundle these together, and they have different answers. Whether your spouse holds an office, whether they are paid, and whether they receive dividends are each tested separately.

1. Appointing a director

A private company can appoint a spouse as a director, and the appointment is filed at Companies House. It is a legal role with duties, not a tax device. A director who takes no interest still carries the responsibility, so appoint only someone who understands what they are signing.

2. Paying a salary

This is where HMRC looks. A payment to a relative is deductible only if it is wholly and exclusively for the business. HMRC's guidance says pay in line with what unconnected employees receive should be accepted. Where pay is demonstrably more than commercial, part of it can be disallowed, and in clear cases HMRC may consider the settlements legislation or treat the payment as yours.

3. Receiving dividends

Dividends depend on the shares, not the job. A spouse who owns ordinary shares outright can receive dividends without working in the company, as explained in our page on spousal dividends. Do not use a salary to do the job that shares do.

Keeping it defensible

• Agree a short job description and the hours.
• Run the pay through payroll and into their own account.
• Keep evidence of the work done.
• Set pay by reference to what you would pay someone else.

The same questions arise for a partner who is not your spouse. See giving shares to an unmarried partner.

Sources: HMRC manual BIM47106: pay to friends and relatives · HMRC manual BIM47105: payments to dependants and close relatives · HMRC manual TSEM4205: outright gifts between spouses