Employing my student daughter

[Deleted User]

My daughter has just started an arts degree course.
I am self employed in the arts.
My daughter has done some work for me already - sometimes being paid by others and sometimes by me.

I am thinking that I instead of giving her money, she may be able to register as self employed. I could employ her and save the tax on the money I pay her as one of my legitimate business expenses.

She wants to make her career in the field in which I work and has already gained a lot in terms of skills, experience and networks in working for me.

In the current financial climate, my work is unpredictable. If she earned, as self employed, around £5000 per year from me - working for a range of different clients, could she claim some of her materials, travel etc against her earnings.

i am aware that once she uses up her personal tax allowance, she will have to start paying tax - if she needs to get for example a PAYE summer job.

I'm nearly 60 and want to maximise my tax savings. 20% of £5000 is not much to some but it is a welcome saving to me.

Cheers

chrismac1

"she may be able to register as self employed. I could employ her..."

This is a contradiction - you employ employees, and contract with self-employed people. Will she be genuinely self-employed? (Google "IR35 to find out more.) This in fact won't make any difference to her if her total tax year income is under 5,715 and her income in any given month is under 476 as at that level there is no tax or NI to pay.

Above that level, she has NI to pay and so does her employer - you. So if she's going to go above that in any month, ensure she is operating as genuinely self-employed. Three main tests:

1. Direction and control.
2. Ongoing offer and acceptance of work.
3. Right of substitution.

And many other less important ones. If she's genuinely self-employed, everything you've said about claiming expenses is correct.

olly300

OP as you are self-employed and not a limited company don't google IR35 as there is a different information that is relevant on HMRC pages. For a start there is this: http://www.hmrc.gov.uk/employment-status/index.htm and then there is a test here - http://www.hmrc.gov.uk/calcs/esi.htm

If your daughter is deemed to be self-employed then she can claim business expenses for all the work she does for you.

[Deleted User]

""she may be able to register as self employed. I could employ her..."

This is a contradiction - you employ employees, and contract with self-employed people. Will she be genuinely self-employed? (Google "IR35 to find out more.) This in fact won't make any difference to her if her total tax year income is under 5,715 and her income in any given month is under 476 as at that level there is no tax or NI to pay.

Above that level, she has NI to pay and so does her employer - you. So if she's going to go above that in any month, ensure she is operating as genuinely self-employed. Three main tests:

1. Direction and control.
2. Ongoing offer and acceptance of work.
3. Right of substitution.

And many other less important ones. If she's genuinely self-employed, everything you've said about claiming expenses is correct. "

Sorry - badly worded - meant 'give her work' rather than 'employ her'.

I have had other people working for me - we are often working with disabled people - and it needs a particular kind of understanding about partnership working, so I prefer to work with my daughter.

I am also physically impaired and increasingly need help to transport materials, etc.

Thanks again

[Deleted User]

olly300 wrote: »

OP as you are self-employed and not a limited company don't google IR35 as there is a different information that is relevant on HMRC pages. For a start there is this: http://www.hmrc.gov.uk/employment-status/index.htm and then there is a test here - http://www.hmrc.gov.uk/calcs/esi.htm

If your daughter is deemed to be self-employed then she can claim business expenses for all the work she does for you.

Thanks for your help

[Deleted User]

OP as you are self-employed and not a limited company don't google IR35 as there is a different information that is relevant on HMRC pages. For a start there is this: http://www.hmrc.gov.uk/employment-status/index.htm and then there is a test here - http://www.hmrc.gov.uk/calcs/esi.htm

I can't make these links work - what am i doing wrong?

chrismac1

Just beware of anything posted by HMRC or indeed anyone who works for them says on this subject. Why? Because they lose more or less all of the cases except ones where the "employer" and "self-employed" person pretty much contradict one another in the Court / Tribunal.

Why do they lose?

In my opinion, because they use a box-ticking approach to this topic. Luckily there are people hearing these cases who have a bit of commercial savvy about them, possibly even have some experience of trying to feed their family on minus 2 grand for the month like many self-employed people will experience once or more every few years. So by all means go ahead and tick the boxes but don't take that as the final answer. Given the fact that you are small beer to HMRC, and the fact that IR35 is now in the long grass of a Government review, take the risk and set up the mechanics to treat your daughter as a sub-contractor. Make sure the arrangement ticks as few of the "employed" boxes as you possibly can.

Having posted this, I will now lie low from this thread as the ton of bricks descends from the HMRC staff on this site.....

[Deleted User]

No bricks from me just hearty thanks from a self employed person!

I guess there are so many seperate worlds, each with its own specialized language.

You have to be multi lingual without losing the sense of what you want to do - fit your intentions into other people's frame of reference.

No intention toward deception just looking at the rules and making them work for a living!

Here's to purposeful impatience!

Bean_Counter

Well I don't work for HMRC, but whenever I am looking at the employed vs self employed issue in our business, I start by looking at this link.

You say that you have had other people working for you in the past. I presume that you did not operate PAYE but treated them as self employed? The above link is pretty straightforward and in the vast majority of cases it is simple to see whether a person should be employed or self-employed.

[Deleted User]

Bean_Counter wrote: »

Well I don't work for HMRC, but whenever I am looking at the employed vs self employed issue in our business, I start by looking at this link.

You say that you have had other people working for you in the past. I presume that you did not operate PAYE but treated them as self employed? The above link is pretty straightforward and in the vast majority of cases it is simple to see whether a person should be employed or self-employed.

Yes - exactly so. I can sometimes bring in extra people to do a job for a client and have the client pay them directly (this I often prefer, because my business is basically fees for services and I am able to keep below VAT. For the same reason I often have the client pay for any large amount of materials or print costs - in the case of writing a publication - I don't want to needlessly complicate my business by raising my turnover) sometimes I pay people I hire myself.
I currently have 6 clients with projects at different stages of development.
The kind of clients I have are also interested in bringing emerging practitioners into the industry. The work relies heavily on track record, which is hard to aquire. I also sometimes have requests from emerging practitioners or volunteers, who want hands on experience - but I am mindful of insurance (in this case public liability and CRB checks).
I am only in a position to sometimes hire people on a project by project basis so am not in a position to operate PAYE.