What would my status be?

yummymummy79

My OH has been running his own business since Oct 06, and I work somewhere else for 22 hours pw. We are now looking at me leaving my job and working with him to expand the business.

Now this may be a stupid question and very obvious to some people, but not to us!! If I did this, would I be classed as self employed as well, or an employee, or as unemployed. The reason I'm not sure is that the business is all in his name at the moment so didn't think me being self employed as well sounded right. Didn't think I would be an employee as I won't be getting paid in the way that I see an employee would be, general drawings will just hopefully increase as business picks up. And didn't think I would be unemployed as I would actually be working.

The only way I can see it mattering is for Tax Credits purposes, as I will be working more than 16 hours so don't want to lose out on anything by classing myself as the wrong thing. We thought about making it a partnership but again not sure how it would all work.

Any suggestions?! We will probably be running it by the accountant etc when we see them next but would just like an initial idea.

Thanks in advance.

anniecave

If he is running his own business as a sole trader (assuming that's what he is), then the normal way would be he would employ you, and pay you wages/salary, and deduct any tax and national insurance for you, and pay employers national insurance contributions. I think if you only worked a few hours a week, you'd be under the threshold for all those things so that would be easier. As a rough average from memory, I think you can earn around £100 per week before you get into paying tax, ni etc.
I think the other way of going about it is if you set yourself up as self employed too, and then you could invoice your OH for your time and he pays you. You'd then be liable for your own income tax, national insurance etc.
I don't know what the annual turnover limits are for a business before your OH would need to register for and charge VAT (assuming he doesn't at the moment). You'd need to consider that too.
And any work you did (employed or self employed) would affect your tax credits.
All the best with whatever you decide to do.

Bean_Counter

You could try a partnership, where you are both effectively self-employed. Assuming that you have no employees, you could avoid the hassle and NI costs of operating PAYE.

Not sure of tax credits implications.

longforgotten

Turnover has to be over £64,000p.a. before a business has to register for VAT.

Savvy_Sue

Does your OH have an accountant? If so, that's what you're paying him for (to give you this kind of advice!) If not, maybe it's time you had one (to give you this kind of advice!) And no, I'm not an accountant, but a good one should save you money.

You could also ring HMRC and talk to them. I know they're not there to save you money, but they will certainly advise you on the ways you really shouldn't do it. And as it's not your decision but theirs whether you're self employed it is certainly worth consulting them.

I think, for example, that if you claimed to be self-employed but your only client was your DH they would probably argue that he was employing you and throw a retrospective bill at him for tax, employer's NI, employee's NI, and possibly a fine as well (not sure about that last bit!)

Pennywise

If you aren't "officially" employed or self employed, your personal tax-free allowance, lower rate tax band and NIC position will be wasted, meaning a lost opportunity for you both. If your OH just takes more drawings and officially nothing is "yours", then he'll be paying full tax and NIC on it.

At the very least, you need to be paid the "going rate" for the hours you do. The simplest and least controversial way is for him to put you on the payroll and pay you a wage. You won't pay tax nor NIC on the first £5,225 p.a., but he'll get tax and NIC relief as an expense, saving him up to £1,500 p.a. in tax and NIC. Even though you wouldn't being paying tax or NIC on that wage, as long as he paid you more than say £4,500 p.a. you'd still get credits towards state benefits (SSP, SMP, pension etc).

Alternatively you could join him as a partner, but there are legal implications, especially if the business failed, you could both lose your personal assets. You need to give this serious thought.

I don't think it would work for you to register self employed yourself and invoice your OH for work you do. HMRC decide employment or self employed status and working exclusively for another person/business is usually regarded as employment, not to mention the hassle of registering s/e, accounts, tax returns etc for you as well as OH.

yummymummy79

Thanks for all the replies. We are due to see accountant in the next couple of weeks to sort out last years's accounts so can bring this up too. Was just after a bit of basic info, which I now have, thanks!

I think that it may be best to go down the him paying me a wage route, but keep it fairly low to bring it under the relevant thresholds some of you have mentioned.

I thought of the partnership thing as nothing is in my name so would be good for me to have some kind of ownership, but then of course on the other hand as the house is in joint names then wouldn't want to risk anything.

The business is still reasonably small at the moment so not really at risk of losing much if it all goes wrong, but it is looking promising at the moment.

Thanks again for all your opinions.

YM79