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Wife cannot work - Mental Health Issues
Comments
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It is definitely not OK to pay a relative a salary if they are not working in the business. If they work in the business, then the salary they receive needs to be in line with the going rate for the work that they are doing. It sounds like this is what you have been doing, which was fine.
Your wife should have a contract really, which would include how many hours she is expected to work and what her duties would entail. If she is still able to fulfil many of these duties, then you would be fine to keep paying her but should be looking at how the business can work with her to ensure she can return eventually to her full duties. This is what a caring employer would do, and in addition ensures that you are complying with the disabilities act. At some time in the future, it might end up that you reduce your wife's contracted hours to reflect her reduced contribution to the business, however to carry on paying her whilst she hopes to still come back to her 'normal' hours is quite acceptable.
Basically if it could look to HMRC that you are only paying your wife in order to avoid paying corporation tax / your own personal tax bill, then it would be dangerous. However I would say that currently you are just behaving as a compassionate employer, rather than avoiding tax.
How old is your child? Just as a separate point, if the child benefit is in your wife's name, then her NIC contributions will be covered up until her youngest child is 12. This is called Home Responsibilities Protection. This might help to decide what to do, if in the future your wife is unable to work for a time.
Good luck to you both.0 -
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fishybusiness wrote: »Nope, there is no requirement for a director to be on PAYE.
Company can invoice director for services and said invoices pay can be returned on SA.
Director needs no contract of employment.
CT is still within company and makes so difference to SA, which is normal.
I never said they had to be PAYE or that the needed to have an employment contract. But if they take a salary or receive company benefits then they do need to go through PAYE.
The terms of the engagement would need to be very clear to show that the self employment was genuine. You can't just pick and choose what suits.
You simply said a director can be self employed. The directorship and self employment are two different things.
Directors pay must be through payroll (i.e. with PAYE and NI deducted) except for very exceptional circumstances.
The only scenario where a director can invoice their own company is if the individual has a separate business already acting for other clients in a particular type of work and provides that service to the company. HMRC example is that of a practicing solicitor who is also a director of a retailing company, who provides some legal services to the company. However any work that is of the nature of acting as a director cannot be invoiced and any type of work that you don’t already have a business in cannot be invoiced.0 -
Ok, as you've discovered, you are asking Q1 on the wrong forum.After that long winded bit - a couple of questions.
1. How should I handle this as a Company Directory
2. If the company makes her redundant will she be eligible for any benefits. (she is to unwell to go on job seekers, but probably not classed as unwell enough for disability)
We have however answered Q2.
You cannot make her redundant, unless you make the position redundant.
Ideally the company should pay her sick pay or SSP if she is too unwell to work before moving to benefits.
She would probably be eligible for ESA (and maybe PIP) but would need to be able to go to the GP, fill out forms & maybe attend a face to face assessment.0 -
It is definitely not OK to pay a relative a salary if they are not working in the business. If they work in the business, then the salary they receive needs to be in line with the going rate for the work that they are doing. It sounds like this is what you have been doing, which was fine.
Yes, I'm always ultra cautious about this;
1. Because I don't want it to come back and bite us.
2. I actually want to do things correctYour wife should have a contract really, which would include how many hours she is expected to work and what her duties would entail. If she is still able to fulfil many of these duties, then you would be fine to keep paying her but should be looking at how the business can work with her to ensure she can return eventually to her full duties. This is what a caring employer would do, and in addition ensures that you are complying with the disabilities act. At some time in the future, it might end up that you reduce your wife's contracted hours to reflect her reduced contribution to the business, however to carry on paying her whilst she hopes to still come back to her 'normal' hours is quite acceptable.
Going back about 10 years she initially had a contract to work 16 hours a week, flexi hours, general secretarial services.
Some weeks she would work more, overs less, impossible to be accurate though, as her work basically entails covering for me when I am not in the office.Basically if it could look to HMRC that you are only paying your wife in order to avoid paying corporation tax / your own personal tax bill, then it would be dangerous. However I would say that currently you are just behaving as a compassionate employer, rather than avoiding tax.
That is the worry in the back of my mind, it may look suspicious even though it is genuineHow old is your child? Just as a separate point, if the child benefit is in your wife's name, then her NIC contributions will be covered up until her youngest child is 12. This is called Home Responsibilities Protection. This might help to decide what to do, if in the future your wife is unable to work for a time.
Good luck to you both.
2 children, 1 11 year old.
Problem is, going back 20 years when she was really bad I was made legally responsible for her regarding social services (don't know the correct terminology)
Child benefits go in to her account, but I may still be legally the named person.
If she does stop work now I will check, sounds like it ends in a few months though anyway, as youngest will be 12
From everything I am reading keeping thiongs Status Quo is the best option, we allways have that niggling doubt though.
Edit to add: Regarding her contacted working hours.
We shall be reducing those soon anyway.
New contract will be 12 hours at £10 an hour (basically to just keep her above LEL) this will be more in line with what she was doing (up until recently)0 -
Darksparkle wrote: »I never mentioned anything to do with CT? I mentioned NIC.
No, but if she is paid a dividend it comes after Corporation Tax
If she is paid a wage, there is no Corporation tax on it, no PAYE and no NIC (as it is below her allowance)
That equals an approx. £1,700 corporation tax saving.0 -
No, but if she is paid a dividend it comes after Corporation Tax
If she is paid a wage, there is no Corporation tax on it, no PAYE and no NIC (as it is below her allowance)
That equals an approx. £1,700 corporation tax saving.
That I understand but it could help reassure her. She'd then be getting paid for being a shareholder rather than an employee.
Or some combination of the two.0 -
I'd try not to worry too this side of things for now. I think you are being fair, both to your wife and the company. If / when the situation changes, then feel free to come back for more advice. You should also be consulting your accountant, as that is what you are paying them from. I do understand your wife's lack of faith in them, but you can always ask for their advice without involving her too much if it would help.
I'm an accountant and have suffered from mental health problems in the past. I think you're doing a good job of ensuring you look after your wife and also complying with the spirit and letter of employment / tax law. Feel free to PM me, if you need any more help.0 -
Quick update for anyone who is interested.
We decided in the end that she would no longer work for the company.
It means I have to work longer hours and we lose out on her tax allowance, but if it stops her worrying about it then so be it.
She's now technically a nothing, not in employment, not looking for employment, but not claiming any benefit.
Only real concern is her lack of paying NIC contributions.
How many years can she miss before it starts effecting her pension?0 -
None. She can claim Employment and Support Allowance even if she just gets credits only they will help maintain her pension entitlement.Quick update for anyone who is interested.
We decided in the end that she would no longer work for the company.
It means I have to work longer hours and we lose out on her tax allowance, but if it stops her worrying about it then so be it.
She's now technically a nothing, not in employment, not looking for employment, but not claiming any benefit.
Only real concern is her lack of paying NIC contributions.
How many years can she miss before it starts effecting her pension?:footie:
Regular savers earn 6% interest (HSBC, First Direct, M&S) Loans cost 2.9% per year (Nationwide) = FREE money. 0
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