Using your child's Income Tax Allowance ?

fengirl_2

Depends on the nature of the contract between parent and child.

RainMaker_2

fengirl wrote: »

Depends on the nature of the contract between parent and child.

What exactly do you mean by "contract" ? 15 y-o son assists with renovation and other works during school holidays and invoices me for £ 5,460. Can anybody foresee any problems ?

Soubrette

RainMaker wrote: »

What exactly do you mean by "contract" ? 15 y-o son assists with renovation and other works during school holidays and invoices me for £ 5,460. Can anybody foresee any problems ?

The Inland Revenue do not approve of schemes set up for no other reason that to avoid paying tax. The situation I specifically investigated about 10 years ago was two people as directors of a company, say a mum and son. The son does the work and takes a salary. The dividends are then split between the two director. The mum then uses her dividend to pay off son's credit card.

Not allowed by the revenue as it is obviously tax evasion.

In your example the revenue would be very interested in why an unskilled underage assistant is on a fabulously high hourly rate. They would also be interested in whether all the money is kept by your son or if it is in some way filtered back to yourself.

If the revenue become interested then you may then have problems with the limitations set out for the employment of youngsters under 16 as other government departments become involved.

All this work was done about 10 years ago when I was a company secretary of a small company but I don't imagine that things have changed too much.

Sou

fengirl_2

The contract between you and the child would have to answer such things as: can the child set the rate of pay (in the same way as if you asked a decorator to come and do your bedroom - he would quote you a price); can the child choose his own hours; can the child send someone else to do the job; does the child have to make good any work done badly in his own time; is the child risking his own money in wokring for you? if the answer is no to these, then he would probably be an employee.