Employing a student

[Jessica@WhiteFieldTax]

Interesting to note though...

Most employers prolly wouldn't have known what a P38(s) was if it bit them on the bum anyway....

[northernladuk]

Interesting to note though...

Important updates and changes
From 6 April 2013, Form P38(S) will be withdrawn and students will be treated in the same way as all other employees for PAYE tax and NICs purposes regardless of when they work for you.

The processes described here will be different after you start to send PAYE information in real time. This might be a good time for you to familiarise yourself with any changes so that you are ready to operate PAYE in real time.

[northernladuk]

Yeah, but I think the point there is that the expenses were being funded by the public purse. If you employ your own offspring, the money comes from your limited. As long as the directors are happy with the arrangement, there isn't an issue. Probably.

Possibly but the fact he wasn't doing the work is the root problem that has caused the outcry.. but anyway..

These links might help. They cover employing children and also empoying students during holiday periods. For all my bleating if it came down to it and I had genuine work he could do I would be looking at thsi as well..

HM Revenue & Customs: Student employees

http://www.hmrc.gov.uk/forms/p38s.pdf

https://www.gov.uk/contract-types-an...and-volunteers

Tax rules about employing family members | Start Up Donut

What about employing my children?
Subject to employment laws, you can employ your children in the business. Again you must pay them the relevant national minimum wage for the hours they work.

It may also mean that because of the payments made to your children you must register with HMRC as an employer. Be sure to check or else you could incur fines and penalties.

What if my offspring are students?
If you employ a student at any time other than their normal holidays, you operate PAYE as normal. However, if you have children at college or university and you employ them solely during the summer, winter or Easter holidays, you may be able to apply special rules to their pay which can make the administration simpler and negate the need for you to register as an employer with HMRC.

If you meet this criteria, you may be able to pay the student without deducting tax, although in most cases you will still have to deduct and account for national insurance. Full details can be found on the HMRC website.

[mudskipper]

No muddling here...

Tory MP faces ban for 'employing' son - Telegraph



There was also a presenter accused of doing the same and MP's keep getting caught out paying members of family that don't work for them a number of times. Can't remember presenters name.
Anyway, different kettle of fish as this is in the public sector so will stop banging on about it. Sorry

Yeah, but I think the point there is that the expenses were being funded by the public purse. If you employ your own offspring, the money comes from your limited. As long as the directors are happy with the arrangement, there isn't an issue. Probably.

[northernladuk]

No muddling here...

Tory MP faces ban for 'employing' son - Telegraph

A senior Conservative MP faces a two-week ban from the House of Commons after it emerged he improperly “employed” his teenage son - who was a full-time university student - as a Parliamentary assistant.

There was also a presenter accused of doing the same and MP's keep getting caught out paying members of family that don't work for them a number of times. Can't remember presenters name.
Anyway, different kettle of fish as this is in the public sector so will stop banging on about it. Sorry

[Platypus]

Paying someone for work that they didn't do isn't within any rules as many MP's and presenters have found out so it isn't similar at all IMO. That is all down to whether or not you get investigated of course......

I think you're muddled on this one. MPs were investigated for cheating their expenses while presenters are being investigated for being disguised employees.

I've only ever seen it happen once in the last 25 years, and that was a £50k salary to daughter.

Thanks, that would not be my situation!!

[Jessica@WhiteFieldTax]

This is my only concern, but does it happen in reality?

I wonder if this is like the monthly dividend thing... everyone is afraid to do it, but in reality there's no law against it and HMRC has never successfully claimed that divs are in fact salary and that NI is due.

I've only ever seen it happen once in the last 25 years, and that was a £50k salary to daughter.

[northernladuk]

This is my only concern, but does it happen in reality?

I wonder if this is like the monthly dividend thing... everyone is afraid to do it, but in reality there's no law against it and HMRC has never successfully claimed that divs are in fact salary and that NI is due.

The divi question is pretty irrelevant, you are allowed to take a divi whenever you want even if it is on exactly the same day as a permie gets paid. It is still a divi and a decision was made within the rules to do that. Paying someone for work that they didn't do isn't within any rules as many MP's and presenters have found out so it isn't similar at all IMO. That is all down to whether or not you get investigated of course......

[Platypus]

There is also a risk of the expense being disallowed if they are not doing a substantive role for their payment - the problem here is that although the expense is disallowed it's still taxed on the recipient.

This is my only concern, but does it happen in reality?

I wonder if this is like the monthly dividend thing... everyone is afraid to do it, but in reality there's no law against it and HMRC has never successfully claimed that divs are in fact salary and that NI is due.

[Jessica@WhiteFieldTax]

Re your own kids:

If they are below 18 then there is a risk from our old friend the Settlements Legisltion.

There is also a risk of the expense being disallowed if they are not doing a substantive role for their payment - the problem here is that although the expense is disallowed it's still taxed on the recipient.

Subject to those risks it can be done, and clients have done it without difficultly.

If you have in mind trying to offset their tuition fees or similar then you are entering a minefield I'ld advise you to avoid.

Re other kids: no tax issues, but there are restrictions on the hours they can do. And on H&S grounds, supervision by Radio 1 DJs isn't recommended.

[d000hg]

Don't get romantically involved with them would be my advice, especially if it's a family member.

[Wanderer]

Has anyone done this, specifically when the student was their own son or daughter ?

There are always going to be people who are suspicious that the parent was "employing" their child as a tax avoidance measure and that in the absence of the "employment", they would have given the child the money anyway.

Can't see anything wrong with it though, if it's a genuine family business go right ahead.

[Platypus]

The rules for employing students are clearly laid out by HMRC:
HM Revenue & Customs: Student employees

Has anyone done this, specifically when the student was their own son or daughter ?

If so, any tips, pitfalls, do's or don'ts ?

Clearly, I'll check with my accountant, but it's more likely that someone on here has experience of doing this whereas I'll bet that my accountant just looks up the same rules that I indicated above.

TIA.