Does it make a difference what your paying some for ltd company?

Okydoky25

My husband owns his own ltd company. He pays himself and I receive a small salary also PAYE.

I'm a SAHM but help with the admin etc.

I'm considering going back to full time employment where I can earn a good salary but it just doesn't make financial sense with childcare costs. What I'm wondering is can he pay his mum a salary to look after the kids from his company directly or pay himself more and then pay her out of this making her self employed?

CKhalvashi

It's certainly doable, but would probably come under intense scrutiny from HMRC should it be checked, and I've never seen law on this either way.

Until a few years ago, I could claim my DDs schooling costs as a charitable donation, and this has now been closed. Childcare vouchers are available for an OFSTED registered supplier.

Is there chance of your DH working at home for some of the week?

CK

gb12345

As CK says, the first option would come under scrutiny from HMRC - you would also need to consider whether the extra admin (payslips, PAYE etc) were worth the while.

The second option is totally legitimate as the two transactions (his salary and paying his mum) are totally separate. Obviously he would need to consider whether and extra tax/NI that he has to pay on the increase makes it worthwhile. His mum would also have to register as self-employed and do a self-assessment form each year.

Okydoky25

By paying himself more to then pay his mum is ideally something we would like to avoid as it would mean going over the 40% tax bracket.

Altho he does work from home occasionally he would not be able to work and look after the kids.

gb12345

An alternative solution could be to make his mother a shareholder in the company. You could structure it in such a way that she would get a dividend equal to what you want to pay her for the childcare.

Okydoky25

gb12345 wrote: »

An alternative solution could be to make his mother a shareholder in the company. You could structure it in such a way that she would get a dividend equal to what you want to pay her for the childcare.

How would that work with paying her Tax/NI? She's only 57 so wants to carry on paying NI for her pension altho I'm guessing she would have paid enough by now?

Also I am a share holder so could it be done that I get the dividend rather than my salary and pay her?

I'm wondering if by her being self employed or even PAYE through the company if she would need to be ofsted registered etc? Or is it a case of declaring she's our cleaner or nanny or something other than our childminder?

gb12345

Okydoky25 wrote: »

How would that work with paying her Tax/NI? She's only 57 so wants to carry on paying NI for her pension altho I'm guessing she would have paid enough by now?

The dividend would have the usual tax credit, so she would have no further tax to pay (unless she somehow becomes a higher rate tax payer - which I assume won't happen). She would lose out on the NI, but as you say she may have paid enough already for pensions.

Okydoky25 wrote: »

Also I am a share holder so could it be done that I get the dividend rather than my salary and pay her?

You would need to look at how the company is structured - there is no reason why you shouldn't hold more shares than your husband and get a higher dividend and then you're free to do whatever you want with that money. You would need to check that the salary you are receiving and the dividends (plus any other income) don't make you a higher rate taxpayer.

You might be best off speaking to the company's accountant and seeing what he advises is the best way forward.

Okydoky25 wrote: »

I'm wondering if by her being self employed or even PAYE through the company if she would need to be ofsted registered etc? Or is it a case of declaring she's our cleaner or nanny or something other than our childminder?

Don't know about this - you would need to check with ofsted to see what their rules are on someone looking after 1 child.

Savvy_Sue

Okydoky25 wrote: »

I'm wondering if by her being self employed or even PAYE through the company if she would need to be ofsted registered etc? Or is it a case of declaring she's our cleaner or nanny or something other than our childminder?

If she looks after the child(ren) in your home not hers, then the rules are a lot looser. If you pay someone to look after a child in their own home, then Ofsted rules apply, although there was some talk of relaxing them slightly following that case where two policewomen had a mutual childcare / shifts arrangement. I do not know the latest situation or how it affects grandparents.

gb12345 wrote: »

You might be best off speaking to the company's accountant and seeing what he advises is the best way forward.

This. We can't possibly give you the best advice here, the accountant will know how the company is structured and will know what questions to ask to ensure you get best advice.

CKhalvashi

gb12345 wrote: »

The dividend would have the usual tax credit, so she would have no further tax to pay (unless she somehow becomes a higher rate tax payer - which I assume won't happen). She would lose out on the NI, but as you say she may have paid enough already for pensions.

£9440 salary is the best way, BUT she would have to do some work for the company.

Don't know about this - you would need to check with ofsted to see what their rules are on someone looking after 1 child.

I don't know the legal system with payment.

If she's OFSTED registered for payment, it would be more tax efficient to claim the childcare vouchers.

CK

Atidi

Okydoky25 wrote: »

My husband owns his own ltd company. He pays himself and I receive a small salary also PAYE.

I'm a SAHM but help with the admin etc.

I'm considering going back to full time employment where I can earn a good salary but it just doesn't make financial sense with childcare costs. What I'm wondering is can he pay his mum a salary to look after the kids from his company directly or pay himself more and then pay her out of this making her self employed?

Unless I'm missing something here, I can't see how the business can pay your mum to look after your kids.

Well I suppose it could if childcare became an inclusive part of your or your husband's employment, but then that employee would be taxed on the childcare provided as a Benefit in Kind.

Yes, your husband could pay himself more money (if the business can stand it) but there are much better ways of taking money out of a business you own than by increasing your salary which will go through PAYE, where the employee & employer will have to pay more NI.

If your mum starts earning childcare fees she should register as self employed (if not already) and have appropriate insurance etc. (because I can't see any way she could be an employee of the business providing childcare)

nomunnofun

Atidi wrote: »

Unless I'm missing something here, I can't see how the business can pay your mum to look after your kids.

Well I suppose it could if childcare became an inclusive part of your or your husband's employment, but then that employee would be taxed on the childcare provided as a Benefit in Kind.

Yes, your husband could pay himself more money (if the business can stand it) but there are much better ways of taking money out of a business you own than by increasing your salary which will go through PAYE, where the employee & employer will have to pay more NI.

If your mum starts earning childcare fees she should register as self employed (if not already) and have appropriate insurance etc. (because I can't see any way she could be an employee of the business providing childcare)

In total agreement with this post - mum does no work for the company and, therefore, is not an employee of the company. The company cannot legitimately claim any such expense.