Spouses paying each other

chucknorris

What I would like to do:
I do not want to do anything illegal, but I am willing to do what is considered legitimate by the inland revenue. My wife and I both own investment properties in our own names (we also own one jointly owned, but lets leave that one out of this for now). Would it be possible for me to pay my wife to manage my properties and vice versa? Or is that just taking liberties, and would be seen as such by the inland revenue? I was thinking about something along the lines of 10% of rental income for both management and finding new tenants (when appropriate).

Background:
I would like to pay more into my pension, by buying additional pension within the teachers pension scheme, when I join the 2015 scheme in 2020, right now I am a tapered member, and remain in the older scheme until 2020, and i have already bought the max allowed pension in that scheme.

When I join the 2015 scheme I can once again buy the max allowed within that scheme, which is currently £6,800 per annum. That however will cost about £112k, and I would have to buy it before my state pension age, which only gives me 4 tax years to do so. The problem is that I now only work one day a week for just under £11k, so my relevant income is not sufficient to buy what I would like to (I have plenty other income i.e. rental, dividend, interest etc).

molerat

I think that type of arrangement would be considered contrived by HMRC.

bertiewhite

Which thread do you want us to reply to?

https://forums.moneysavingexpert.com/discussion/5739763

chucknorris

bertiewhite wrote: »

Which thread do you want us to reply to?

https://forums.moneysavingexpert.com/discussion/5739763

Obviously either one will do, I duplicated it because posters who frequent only one of the two forum boards might reply.

chucknorris

molerat wrote: »

I think that type of arrangement would be considered contrived by HMRC.

That is my gut feeling too. I will probably be able generate more relevant income if I buy a holiday home in Spain (which is a distinct possibility), but not as much as I would like.

chrismac1

What you are suggesting is in no way illegal and not all that unusual. You'd need to set up PAYE schemes, though, which means filing monthly returns to HMRC. The salaries would need to be justifiable in realtion to the duties being undertaken, but at around the £10k level - if that's what you're suggesting - that should be reasonably easy.

Don't be scared of HMRC.

chucknorris

chrismac1 wrote: »

What you are suggesting is in no way illegal and not all that unusual. You'd need to set up PAYE schemes, though, which means filing monthly returns to HMRC. The salaries would need to be justifiable in realtion to the duties being undertaken, but at around the £10k level - if that's what you're suggesting - that should be reasonably easy.

Don't be scared of HMRC.

Thanks, I'm not scared of the IR, in fact, I have found them very helpful in the past. What I want to avoid though is admin and paperwork, which is why I was hoping that it could be done on a self employed basis. Which is where I believe that what I would like to do becomes unworkable. I also posted this on the small business forum, so I reckon I just have to increase my working hours and move into letting holiday income as a way of increasing my 'relevant income'.

00ec25

chucknorris wrote: »

I was hoping that it could be done on a self employed basis. Which is where I believe that what I would like to do becomes unworkable. I also posted this on the small business forum, so I reckon I just have to increase my working hours and move into letting holiday income as a way of increasing my 'relevant income'.

sadly for you IR35 has been brought out to try (it is very clumsy) and plug that option - in the old days one way was for each of you be set up a sole trader letting agency and then you appoint the agent (your wife) to do the work as a self employed sole trader, but really won't work now as she'd be labelled your employee not a self employed trader... unless she genuinely did manage other LLs of course?

chucknorris

00ec25 wrote: »

sadly for you IR35 has been brought out to try (it is very clumsy) and plug that option - in the old days one way was for each of you be set up a sole trader letting agency and then you appoint the agent (your wife) to do the work as a self employed sole trader, but really won't work now as she'd be labelled your employee not a self employed trader... unless she genuinely did manage other LLs of course?

Thanks, but I did think myself that it was too manipulative, so I do actually agree with the IR closing that tax loophole, if they had not though, I would have exploited it.