Working for free for my family's business

revvans

Good evening. I hope someone will be able to help me.
I work for my mother's business, and get a weekly wage of £175 before tax. She's having a very hard time with the business just now, and the shop is now in a lot of debt. My wife and I have been drawing my wage out of our account and giving it back to my mother for a few weeks now, which is fine, but tax/NI wise it looks like I'm earning more than I get.

It would obviously be easier for her to stop paying me at all, or simply pay me a token wage, which is absolutely fine with both my wife and I, as we can get by on on my wife's wage, but my mother has said she is legally obliged to pay me, even if I am her son, for the work I do. (I work around 45 hours a week for her) She thinks it would throw up more problems than it solved viz a viz employment legislation, and that the only people who can choose to do this are directors of their own companies.

We'd rather take the long term view and make sure the business survives this bad patch, but don't want to get mum into trouble.
Has anyone any advice? Many thanks in advance.

paddedjohn

If you work 45hrs then she is breaking the law anyway, on nmw you should be getting about £273. Make you a director and then you can work for nothing, at the moment your mum is paying out £175 in wages to you but because of the tax and ni she is not getting it all back. Only winner = taxman.

revvans

Thank you for the reply paddedjohn.
Aye, we've known for a while she should be paying me minimum wage but the business just won't stand it. She also (for various reasons) needs me to work for her and, to be honest, I wouldn't want to work anywhere else.
It's not a limited company, so I can't be a director. She's a sole trader.
And yes, you're right, the taxman seems to be the only winner as she's paying me employers rate tax and NI.

paddedjohn

To be honest, i dont think there is any law stopping you working for nothing, volunteers do it in charity shops and a lot of people work unpaid overtime. The min wage reference above was an extreme and i dont think your ma could be in trouble since you arent complaining.
Another option would be to defer your wage until the company is on its feet.

revvans

Thank you paddedjohn. I think I might take that tack so the business survives. Just wasn't sure whether voluntary working would be seen badly by the tax man. Many thanks for your help.

LittleVoice

National Minimum Wage regulations do not apply to people working in their family business.

LittleVoice

paddedjohn wrote: »

If you work 45hrs then she is breaking the law anyway, on nmw you should be getting about £273. Make you a director and then you can work for nothing, at the moment your mum is paying out £175 in wages to you but because of the tax and ni she is not getting it all back. Only winner = taxman.

NMW doesn't apply to a family business. This may not truly be a family business but is worth considering that possibility.

revvans

Thank you LittleVoice, perhaps I should phone the appropriate DWP department. I was rather shying away from doing that, but I don't see why I could phone for general information. I'm off to have a look online.
Many thanks

pearl123

Donkeys years ago I worked for my parents company for free. They were getting to old to run a business and it was their only income. They have gone under if I had not. I had to turn around years later and find money to pay my NI. I lost out finacially but it saved them being gutted.

revvans

Pearl123, that's pretty much my situation.
From my own situation, years ago my mum was kind enough to give me a job in her business, and I feel I should support her now she's finally disclosed to me that the business is in trouble. We're ebaying old stock, and that type of thing, but, it's not enough yet, so we're trying to pull together.
Thank you for the heads up re. the NI situation. I need to look into NI a bit more than I have in the past.

t0rt0ise

You wouldn't get away with being a volunteer. There's a strict definition and you wouldn't be it. You also can only say you are working for the family business if you live with your mother. If you don't then that won't work. So be careful.