Could I make my children partners in my business?

rich11

We have been hit hard by the recession as have many others.My wife and I own our own small business and we were wondering if we made our children (6 and 8) partners in our business would that help get our tax liability down?

Quite simplistic I know but it our profits were £50k(ha I9 wish) the tax liabilty would be in the region of £7.5k each a year

If there were 4 partners and 4 personal tax allowances then surely the liabily would be halved?

Of course I am bound to have missed something but any help would be appreciated

rich11

Ah I knew I would be missing something.Does that mean that child actors/singers etc dont have to pay income tax?

I think I will send them to stage school pronto

chrisbur

Everyone has a tax allowance, whatever their age; and once taxable income goes over that they pay tax. The problem with your idea I think is that you would struggle to convince the tax office that your children were contributing to the business.

rich11

I could employ them as sweet testers lol.Seriously though thanks for your reply

Fiddlestick

rich11 wrote: »

Ah I knew I would be missing something.Does that mean that child actors/singers etc dont have to pay income tax?

That is correct.

They are generally handled by an agency or a management company and all their "earnings" are usually held in trust and invested for them until they reach and age where they are deemed responsible enough to manage their own affairs.

I don't know the exact details, but it's something along the above lines

kickwhamstunner

Rikki wrote: »

They are children are too young to have a tax allowance and be liable for tax.

This is just flat-out wrong.

heretolearn_2

You have a tax allowance right from birth andif you have income it is declared and tax paid, so a lot of the above advice is wrong. Even if child actors earnings are put aside for them, they still pay tax if over the limit.

But, no, OP, nice idea but you won't get away with it. HMRC won't accept them as true business partners earning that money!

bengalknights

if its a ltd company then no you cant as they have to be over 16

TM1976

For a limited co you could just make them shareholders.

I think the problem isn't about whether they contribute to the business but it's about whether they are bone-fide owners of part of the business. Would they be paid dividends or drawings into their own bank accounts? Would they have control over how they spent this money? If not it would be difficult to claim they were owners.

olivetti

http://www.hmrc.gov.uk/manuals/bimmanual/bim72065.htm

laurel7172

Income earned from capital donated by the parent is taxable on the parent until the children reach 18.

Sorry, OP, but we'd all have our savings in our children's names if it were that simple!