Assigning consultancy income to spouse

firks

Hi, first time poster here - go easy on me.

In a couple of months I will be moving to a new employer.

The company I am leaving has asked me to provide some part time consultancy services after I leave (say 5hrs per week, in the evenings) which I am seriously considering to supplement my income and keep a foot in the door there. My new employer does not have an issue with this.

The company is an overseas company with no UK presence (I work from home) and is therefore quite flexible when it comes to my working and pay arrangements. I am also good friends with the MD which helps in this respect too.

My wife is a stay at home Mum so does not have any income, hence her tax free allowance is completely unused. I am a higher rate tax payer so we cannot transfer any of her allowance to me as it stands.

I will a PAYE employee at the new company but will be self-employed as far as the consultancy work goes, so I am wondering if there is any way I could pay the consultancy fees to my wife hence avoiding or at least significantly lowering the tax I pay on this income?

Before anyone jumps in to judge, I'm not wanting to do anything illegal - just wondering if there is an above board way to do this?

Any advice would be appreciated.

Thanks

le_loup

You earn the money - you pay the tax. If she can do the work, I suppose you could sub-contract - then you both pay tax.

kidmugsy

You could set yourself up a limited company to receive the payments, with your wife as a shareholder and perhaps a director. Then if she does such things as type up the minutes of directors' meetings and decisions, does the spreadsheet on cash flows, and the annual accounts, and so on, nobody could object to her receiving some dividends or even some salary.

I know a couple who operated this way: he did the consultancy work, she did all the rest - Company Secretary, ran the company bank account, and so on. Even acted as "IT guy". Maybe she instructed the pension contributions for him for all I know. They said that she held 10% of the shares and that her only "pay" was 10% of the dividends, which was sufficiently small that their accountant had no objections.

Cook_County

As your new freelance contract will offer you the right to substitute another worker, why not have a partnership?

tebthereb

Partnership would also get my vote based on what has been said.

Don’t forget to consider IR35 if you have not already.

unforeseen

Cook_County wrote: »

As your new freelance contract will offer you the right to substitute another worker

If you are lucky. But then they would still expect the substitute to be suitably qualified and experienced.

Or are you talking about using that route as an excuse for tax evasion.

00ec25

kidmugsy wrote: »

You could set yourself up a limited company to receive the payments, with your wife as a shareholder and perhaps a director. Then if she does such things as type up the minutes of directors' meetings and decisions, does the spreadsheet on cash flows, and the annual accounts, and so on, nobody could object to her receiving some dividends or even some salary.

if the wife is a shareholder and the shares are ordinary shares with identical rights to those shares held by the husband, then the wife does not have to do any work at all, she merely has to be a shareholder in order to receive "income" in the form of dividends

this is now firmly established due to the "Arctic Systems" case: Garnett v Jones re Arctic Systems Ltd [2007]
https://www.taxation.co.uk/Articles/2013/06/26/309551/arctic-revisited

if on the other hand the wife also receives a salary in addition to her dividends then, and only then, must her rate of pay be commensurate with the work she does. However, once more there is a further get out in that if the wife is a director, rather than just a "mere" employee, there is no such thing as a rate of pay for a director. Therefore, in that such a directorship scenario, what you say is true, she could be paid £0,000s for merely doing some "secretarial" work and not much else.

00ec25

unforeseen wrote: »

Or are you talking about using that route as an excuse for tax evasion.

no he is talking about that route as one of the very wise things but into a contract to make it IR35 proof and confirm his self employed rather than disguised employee status

much easier to do Ltd Co though.

chrismac1

Spot on. IR35 proof company contracts, along with shares in her name with full voting rights. Ideally with her as a director and why not get her to approve the accounts and corporation tax return?


"What do you mean, HMRC, my wife has no involvement in this company? Don't you bother to read the tax returns we send you?"