self employed, using up tax allowance?

Rhiannon51

Both myself and my husband are self employed, my business makes a small amount of profit where his is doing well. His tax allowance is used up due to his profit but mine is virtually unused. I do lots of work for his business but do not get an actual wage. How much can I claim as a wage to offset his profit and help to use up my tax allowance?

classy69

Rather than a wage, why don't you raise an invoice to hubby, for the amount that is equivalent to the remaining allowances you have. This will increase your income, but not your tax as you are using your allowances, where as in your hubby's accounts it will show as an expense and therefore reduce his taxable profits.

purdyoaten

classy69 wrote: »

Rather than a wage, why don't you raise an invoice to hubby, for the amount that is equivalent to the remaining allowances you have. This will increase your income, but not your tax as you are using your allowances, where as in your hubby's accounts it will show as an expense and therefore reduce his taxable profits.

Of course you would also be advising the op to complete a separate self-employment page for this 'new' business.

The way to go is for the op to be paid (with physical evidence of same) as an employee. The rate of pay must be reasonable for the work done. If well under the National Insurance limit no PAYE records are appropriate.

lazer

purdyoaten wrote: »

Of course you would also be advising the op to complete a separate self-employment page for this 'new' business.

The way to go is for the op to be paid (with physical evidence of same) as an employee. The rate of pay must be reasonable for the work done. If well under the National Insurance limit no PAYE records are appropriate.

Depends on what the business is if she is an accountant she could be doing the books for his business, this would be quite legit, and she could therefore invoice accordingly


OP - unless you are actually doing work for the business it is fraud to invoice your husbands business, the same for being an employee - unless you are actually doing work for him, it is fraud.

purdyoaten

lazer wrote: »

Depends on what the business is if she is an accountant she could be doing the books for his business, this would be quite legit, and she could therefore invoice accordingly


OP - unless you are actually doing work for the business it is fraud to invoice your husbands business, the same for being an employee - unless you are actually doing work for him, it is fraud.

It would be a poor accountant who does not use up her tax free allowance but I take your point.

Rhiannon51

Thanks for all replies. I do do actual work for my husbands business, manufacturing work as well as accounting and office work. So I am not being fraudulent, I just don't think I'm currently making the most of the situation. As you say it is a poor accountant who doesn't use their allowance so any help to put that right is most welcome.

TheCyclingProgrammer

lazer wrote: »

Depends on what the business is if she is an accountant she could be doing the books for his business, this would be quite legit, and she could therefore invoice accordingly


OP - unless you are actually doing work for the business it is fraud to invoice your husbands business, the same for being an employee - unless you are actually doing work for him, it is fraud.

Paying somebody a wage when they don't do anything, or that is grossly excessive in relation to the duties performed, is most definitely NOT fraud. Possibly tax evasion but not fraud.

However, in order for the salary to be a tax deductible cost for the business it must be wholly and exclusively for business purposes. If no work is actually done, or the salary is deemed excessive, it might be argued that this test is not met and no tax deduction would be due on the salary (this is completely separate to the personal taxation on the salary for the recipient).

However, if OP does actually do some work for her husband's business as claimed above then I don't see any reason why she couldn't be paid a small basic salary. As mentioned above, if there are no other employees and the salary is below the NIC LEL threshold and within OPs personal allowance, no PAYE scheme would be necessary.

lazer

TheCyclingProgrammer wrote: »

Paying somebody a wage when they don't do anything, or that is grossly excessive in relation to the duties performed, is most definitely NOT fraud. Possibly tax evasion but not fraud.

However, in order for the salary to be a tax deductible cost for the business it must be wholly and exclusively for business purposes. If no work is actually done, or the salary is deemed excessive, it might be argued that this test is not met and no tax deduction would be due on the salary (this is completely separate to the personal taxation on the salary for the recipient).

However, if OP does actually do some work for her husband's business as claimed above then I don't see any reason why she couldn't be paid a small basic salary. As mentioned above, if there are no other employees and the salary is below the NIC LEL threshold and within OPs personal allowance, no PAYE scheme would be necessary.

Tax evasion is a version of fraud.

Pennywise

lazer wrote: »

Depends on what the business is if she is an accountant she could be doing the books for his business, this would be quite legit, and she could therefore invoice accordingly

Yes, as long as she registered as a business/self employment with HMRC, paid class 2 NIC (or got an exemption certificate if earnings low enough), got professional indemnity insurance (required by most Accountancy bodies), registered for money laundering with HMRC, registered with the data protection registrar under the data protection laws, prepared and submitted a personal tax return each year, and so on. But of course, if she's only doing the "books" for one person, then HMRC may well challenge husband on the grounds that she isn't truly in business according to their employment status tests, especially if she uses his equipment (i.e. computer etc bought by his business, not hers) and doesn't do the accounts/tax returns for any other "clients". Not quite so simple as it seems!

Alternatively, husband could just put her on the payroll and pay the going rate for the actual hours she works! If the wage is low enough, no need for a PAYE scheme to be opened nor reporting her wages to HMRC at all, no need for employers liability insurance, etc. Sounds far more simple really!

patanne

Surely if the OP is already doing self assessment for her own business then the income from her job for her OH will also have to go on the self assessment?

agrinnall

patanne wrote: »

Surely if the OP is already doing self assessment for her own business then the income from her job for her OH will also have to go on the self assessment?

Obviously. Was there some underlying issue that your question sought to address?