Reply to: Paying yourself and spouse wages....

[northernladuk]

Thanks for the reply. I send a few hundred every month to support him with his studies anyway, so a working arrangement with a tax benefit on top would work out very well.

..but unfortunately not.

[VFV]

Thanks for the reply. I send a few hundred every month to support him with his studies anyway, so a working arrangement with a tax benefit on top would work out very well.

[malvolio]

Relevant question so I post here instead of starting a new thread.

I am looking at the possibility of employing my younger brother (living and studying in Greece) as an assistant in my Ltd co, to look after the usual general admin for a salary just below the NI threshold.

The issue of whether the salary can or cannot be commercially justified has been covered in the thread, my two questions are:

1) Can I employ someone who is not resident in the UK and has no National Insurance number in the UK? My guess is no but is there a workaround here?

2) Are the rules different for a non husband-wife relationship, a sibling relationship in this case?


Thanks

1) No, but it's not difficult to overcome that. Get them an NI number

2) Yes. S660a still applies fully, under the connected persons rule. It's precisely what it was meant to prevent in the first place.

3) And one for you - why? What are you trying to acheive?

[VFV]

Relevant question so I post here instead of starting a new thread.

I am looking at the possibility of employing my younger brother (living and studying in Greece) as an assistant in my Ltd co, to look after the usual general admin for a salary just below the NI threshold.

The issue of whether the salary can or cannot be commercially justified has been covered in the thread, my two questions are:

1) Can I employ someone who is not resident in the UK and has no National Insurance number in the UK? My guess is no but is there a workaround here?

2) Are the rules different for a non husband-wife relationship, a sibling relationship in this case?


Thanks

[northernladuk]

So to summarise; If you are genuinely in business (eg, outside IR35) then your spouse can work for the business and the government have no appetite for bringing in a family business tax to prevent a director paying salary and/or dividends to their spouse.

The government isn't stupid and they will be under no illusions that in many cases this is simply income shifting by the director to avoid paying tax. They considered legislating against this but decided not to - it seems to me that they are willing to allow this tax break in order to encourage and promote small family businesses because it's good for the economy...

I think you are making a rather dangerous assumption there. Just because HMRC are not aggressively chasing this does not mean they are happy with it. It is more likely it to be not cost effective or down on the list of priorities. They will be quite happy to pursue individuals abusing it as we have seen a few times with politicians. I would guess it is one of those things they will have for as part time of a bigger place investigation rather than directly targeting it.

[Wanderer]

So to summarise; If you are genuinely in business (eg, outside IR35) then your spouse can work for the business and the government have no appetite for bringing in a family business tax to prevent a director paying salary and/or dividends to their spouse.

The government isn't stupid and they will be under no illusions that in many cases this is simply income shifting by the director to avoid paying tax. They considered legislating against this but decided not to - it seems to me that they are willing to allow this tax break in order to encourage and promote small family businesses because it's good for the economy...

[convict]

If I offered to do all of this for £550 per month, would we have a deal? If I get a good few of you on the go I'll be able to give up on accountancy!! For the record, I'm not offering any other wifely duties...

Craig

So for 500 a month you'll drive me to work indefinitely if the issue arises, do all my PA type stuff and work unsociable hours doing an unspecified amount of admin and logistics type work?

Even if you said yes, you couldn't do this for more than one person as you'd eventually get caught out and need to be in two places at once etc. Sure you could 'employ' people and offer it as a service but then you'd need to factor in profit etc. and I'm not sure it's a workable model given the uncertain and open-ended set of requirements.

[Jessica@WhiteFieldTax]

The 2nd point doesn't count as you have to be clothed - other people without wives who work for them wear clothes and look respectable.

Depends. Can't claim costs on professional clothes thats true, but if work involves you getting dirty, eg installation and grovelling around with cables, then it would be a legitimate claim.

[IR35FanClub]

If I offered to do all of this for £550 per month, would we have a deal? If I get a good few of you on the go I'll be able to give up on accountancy!! For the record, I'm not offering any other wifely duties...

Craig

I'll give you £500 just to do my ironing! That's about £5 an hour. Shame its below minimum wage or we'd have had a good deal.

[Craig at Nixon Williams]

I was thinking about this too. All of the things my partner does to support me while I'm productive at a clients site.
1. On-call driver for when I can't. I damaged my leg and she drove me to and from work for many weeks.

2. Cleaning/Ironing work clothing. Although I don't have a uniform I do have to keep up a standard of appearance. She enables me to do this. If it's something too much, she outsources it to our dry cleaner service

3. Books/Accounting/general admin. Although some of this goes to an accountant, she keeps tabs on receipts and other billable items so I don't have to. It makes more sense for me to be productive elsewhere.

4. Goods receiving inbound. She has to receive and deal with my various computer bits and also returns busted stuff for RMA etc. so she's effectively my logistics manager too.

All this for 600/month is pretty good in my book. It may not be full-time but there is an on-call element to this, out of hours working for unsociable hours etc. too.

I'm happy having to argue her value to HMRC if necessary.

If I offered to do all of this for £550 per month, would we have a deal? If I get a good few of you on the go I'll be able to give up on accountancy!! For the record, I'm not offering any other wifely duties...

Craig

[SueEllen]

I was thinking about this too. All of the things my partner does to support me while I'm productive at a clients site.
1. On-call driver for when I can't. I damaged my leg and she drove me to and from work for many weeks.

2. Cleaning/Ironing work clothing. Although I don't have a uniform I do have to keep up a standard of appearance. She enables me to do this. If it's something too much, she outsources it to our dry cleaner service

3. Books/Accounting/general admin. Although some of this goes to an accountant, she keeps tabs on receipts and other billable items so I don't have to. It makes more sense for me to be productive elsewhere.

4. Goods receiving inbound. She has to receive and deal with my various computer bits and also returns busted stuff for RMA etc. so she's effectively my logistics manager too.

All this for 600/month is pretty good in my book. It may not be full-time but there is an on-call element to this, out of hours working for unsociable hours etc. too.

I'm happy having to argue her value to HMRC if necessary.

The 2nd point doesn't count as you have to be clothed - other people without wives who work for them wear clothes and look respectable.

The rest are very good points and I would record them somewhere.

[convict]

I'm sure the spouses (can be either way) do plenty of work, just never recognised and rewarded - the dynamics of most families, and why until comparatively recently, and mooted to be revived in part, there was an element of transferable personal allowance.

I don't think its ever that hard to justify a spousal salary in most businesses, but if in doubt let the spouse be secretary or director, both roles carry responsibility enough to warrant a fee.

I was thinking about this too. All of the things my partner does to support me while I'm productive at a clients site.
1. On-call driver for when I can't. I damaged my leg and she drove me to and from work for many weeks.

2. Cleaning/Ironing work clothing. Although I don't have a uniform I do have to keep up a standard of appearance. She enables me to do this. If it's something too much, she outsources it to our dry cleaner service

3. Books/Accounting/general admin. Although some of this goes to an accountant, she keeps tabs on receipts and other billable items so I don't have to. It makes more sense for me to be productive elsewhere.

4. Goods receiving inbound. She has to receive and deal with my various computer bits and also returns busted stuff for RMA etc. so she's effectively my logistics manager too.

All this for 600/month is pretty good in my book. It may not be full-time but there is an on-call element to this, out of hours working for unsociable hours etc. too.

I'm happy having to argue her value to HMRC if necessary.

[Platypus]

You need to show that the amount of money you pay her (that is wages not dividends) is the market rate for the work that she does.

That means you can't pay her £624 as a bookkeeper if it takes 10 minutes a month (an extreme example)

You know, I've always wondered if this is true or urban myth.

A bank pays a director millions... does it have to justify to HMRC that the payment is not to high? No.

EDIT: ok I should have read the whole thread since that's where it got diverted

But just a comment. I wouldn't pay any old bod £600 for 10 mins work, but due to the confidential nature of my records and accounts, I might well choose to employ a family member to do the work and also choose to pay them generously.

[northernladuk]

The presumption here is that psychocandy's spouse plays an active part in running the family business and is unpaid at the present time. Paying a salary would simply be recognising the valuable contribution to the business.

It's interesting to look at the Arctic systems case - Mrs Jones was paid a salary but HMRC made no move to question her contribution to the business.

When did we ever presume things when giving advice. We have both seen enough posts on here about using this option and freely admitting their wives do nothing or some ridiculous 'bookkeeping admin' clause. It is normally in the same post as giving dividends as well so is driven purely by tax savings. No way do so many wives do anything physical to the company and if they are the person starts with the right intention to show she works but over time it drops off. People at gigs I have been at have discussed this and ended up as I suggest so I ain't just making this up. For every 1 that might be able to justify this there will be 100's that can't.

Am not trying to be one man fighting a lost cause. Just annoys me when people don't think about this and go for it just because it saves them tax without thinking about why etc. As I say, if you are gonna do this with no justification you might as well cook the rest of your books. Same thing.

[Jessica@WhiteFieldTax]

Again, another post about paying wife to avoid tax. Not a single comment about her actually doing any work.

I'm sure the spouses (can be either way) do plenty of work, just never recognised and rewarded - the dynamics of most families, and why until comparatively recently, and mooted to be revived in part, there was an element of transferable personal allowance.

I don't think its ever that hard to justify a spousal salary in most businesses, but if in doubt let the spouse be secretary or director, both roles carry responsibility enough to warrant a fee.