Paying wife/grand-parent small wage (<5K)

[ASB]

I do this, although my wife is official company secretary. I pay her £475 per month - an amount my account came up with which means she pays a tiny amount of NI (about £2-odd) and therefore qualifies for a state pension, and also she pays no PAYE (she has no other income)

I asked my accountant about what she should actually do for her wage, and he reckons just the act of being company secretary is enough. She also approves my expenses (i.e. signs the form I produce) and opens the mail

You don't actually have to pay any NI to qualify for the years pension credit. Earning between the lel and the primary threshold currently attracts no NI and still gets the years pension credit.

[TCL]

I do this, although my wife is official company secretary. I pay her £475 per month - an amount my account came up with which means she pays a tiny amount of NI (about £2-odd) and therefore qualifies for a state pension, and also she pays no PAYE (she has no other income)

I asked my accountant about what she should actually do for her wage, and he reckons just the act of being company secretary is enough. She also approves my expenses (i.e. signs the form I produce) and opens the mail

[Turion]

Can I pay my dog a salary? He picks up the mail in the morning

[Archangel]

I do it. I pay my partner in cash. And she does errands for the company. Doesn't everyone do this?

No.

My wife is a higher rate taxpayer, so there would be no point.

[BrilloPad]

I do it. I pay my partner in cash. And she does errands for the company. Doesn't everyone do this?

[Skillo]

It it quite, quite acceptable if you are an MP to do this - Peter Hain Minister for Wales or Welsh secratary or some other useless nonjob - OK to get bunged 100K for nowt as well.

Up the revolution!

[Grinder]

I think that if you pay a family member either through a salary or dividends, it is important that they do some work for the company. This may be of an administrative nature (liaising with your accountant, general office duties, etc), or it may be actual billable work for your company, or a combination of both.

I just want to point out that you can't pay family members dividends unless they are shareholders, and shareholders don't have to work for their dividends.

[Little'Old Me]

My wife does not work, and is not registrered as my company (ltd) secretary, but i know of peolple that pay their wifes (not working) or even gradparent (not on means tested benifit) a small wage below 5k to reduce the overall companys corporate tax bill, although they dont actually receive it/get to keep it. Is this legal? what are the pitfalls/perks of this?

I would like to hear your views.

The people I know that pay family members, actually give them the money (instead of housekeeping for example) and they do some work for it, although it tends to be quite minor things.

I pay my elderly mother a small salary. The money is transferred to her each month. And she does work for it. She does all the shredding (of which there is a lot). She does the odd errand, is always there for the postman as I get a lot of registered post and of course the deliveries. If I have a meeting with a client she does the refreshments, and keeps me supplied with coffee and snacks when I'm working during the day. I have a office in the house she lives in, so the company pays a proportion of the bills. And the most important thing - she authorises my expense claims !

[Gonzo]

My wife does not work, and is not registrered as my company (ltd) secretary, but i know of peolple that pay their wifes (not working) or even gradparent (not on means tested benifit) a small wage below 5k to reduce the overall companys corporate tax bill, although they dont actually receive it/get to keep it. Is this legal? what are the pitfalls/perks of this?

I would like to hear your views.

Ah, the old "phantom workers" scam.

Its as old as the hills and never was legal.

[DaveB]

My wife does not work, and is not registrered as my company (ltd) secretary, but i know of peolple that pay their wifes (not working) or even gradparent (not on means tested benifit) a small wage below 5k to reduce the overall companys corporate tax bill, although they dont actually receive it/get to keep it. Is this legal? what are the pitfalls/perks of this?

I would like to hear your views.

No it's not legal. Claiming to pay a wage to someone but not actually paying it, or then clawing it back from them, is tax evasion.

If that person is in receipt of means tested benefits such as income support or tax credits and they do not declare this "wage" then they too can be done for benefit fraud.

Not only that but if you are claiming to be paying a wage you also have to deal with employers NI, PAYE etc. Even if they are below the threshold the paper work still has to be done and failing to do so will also land you in trouble.

[backrubber]

Paying family members

I'm not an expert on these matters, but I think that if you pay a family member, and they don't actually do any work for the company, you would probably have problems if you were investigated by the Inland Revenue.

I think that if you pay a family member either through a salary or dividends, it is important that they do some work for the company. This may be of an administrative nature (liaising with your accountant, general office duties, etc), or it may be actual billable work for your company, or a combination of both.

I think that what you have to remember is that anything you do to reduce the amount of tax you pay may be challenged by the IR. You simply have to weigh up the odds and decide whether something is worth trying or not.

<mod note>Link removed. Sorry, looks really useful but site terms state no advertising please.</mod note>

[dark_stranger]

My wife does not work, and is not registrered as my company (ltd) secretary, but i know of peolple that pay their wifes (not working) or even gradparent (not on means tested benifit) a small wage below 5k to reduce the overall companys corporate tax bill, although they dont actually receive it/get to keep it. Is this legal? what are the pitfalls/perks of this?

I would like to hear your views.