Sole trader -Paying the mrs/partner

Mbsun

I have read a couole of threads that would seem to suggest that what i want to do is not going to be acceptable to hmrc, but i feel there are some differances.
Essentially i wish for my (common law)mrs to come work with me. I say with and not for, as i am a bricklayer. I work in a 2 and 1 gang, we are all self employed on cis, 20% of our wage is deducted before we are paid. We earn quite a lot ( for northern brickies anyway), last year i did 52k
While i understand that remuneration must be plausible, she wouldnt be working for me or a director, it would be with me. Could they be critical still?
Some people may scoff as it sounds a lot, but my labourer gets £20-£25 per hour ( but he has to near kill himself for 7.5 hours a day near none stop) , yet you look on a jobsite and labouring jobs are £10 per hour, my point being what i do is not an industry where you can question if somebody would be able to provide their time for less, it just doesnt work like that
Fwiw my mrs is being made redundant, so her tax allowance is doing nothing shortly

antrobus

If you are going to be paying her, then she would be your employee, and you need to register with HMRC as an employer.

If you are going to arrange for someone else to pay her for working 'with you', then it's none of your beeswax really.

TheCyclingProgrammer

Just FYI, but there’s no such thing as a “common law” spouse.

tebthereb

I don’t see an issue with this.

A previous respondent has said if husband pays wife then she is an employee, but I think there is somewhat more to employment status for tax purposes than this. As the OP has said that his wife will work “with” rather than “for” them, I think we have to assume that if husband is engaging wife on a self-employed basis, although the OP would be wise to use HMRCs online tool (or better still get professional advice) on the specifics of the arrangement.

If paying a spouse on a self-employed basis it is best to retain contemporaneous invoices and evidence of what the payment is for as HMRC are more likely to scrutinise transactions between relatives.

If it was me though I would be more inclined to register a partnership between husband and wife. There would be a fair bit of admin to deal with in registering the partnership (for income tax and CIS) and as there are other factors besides tax to consider it would be best to get a formal partnership agreement, but there is the potential to share profits flexibly to save a good deal of tax in a manner that HMRC will be accepting of.

The reference to common law marriage just means “not formally married” doesn’t it? I don’t really know about this sort of thing but if that’s what it means it only helps as HMRC are even less likely to question it. It perhaps makes the need for a partnership agreement more necessary if pursuing that route, in order to cover both parties.

trailingspouse

So long as she actually does the work, and so long as she is actually paid for it (ie either a pay packet with wage slips or invoices, and she receives payment), it doesn't matter whether you are married, partners, or you just bumped into her on the street. The important thing is that it is a bona fide employment.
What work would she be doing?

agrinnall

What work would she be doing, is she a brickie too? You can't just pay her for doing nothing.

Mbsun

Ok

Firstly she would be no more my employee than either the other bricklayer or our labourer, she would recieve a "cut" of whatevee we make. None of us recieve hokiday or sick pay, neither would she.
I am not sure how the construction industry gets away with workers being self employed but it does
In terms of is she a bricklayer? No? But then our labourer isnt either, but i am a good teacher and will teach some aspects of bricklaying to speed my job up.

I have a geniune issue with my arm, i am in constant pain, its the arm that spreads my mortar, this slows me down, but i can put bricks down just as quick.

My first scenario is my mrs just spreads my bed of mortar, i then split part of my money with her, and the "gang" split remains as it is now. Would this be legal?
My second scenario is she does labouring constantly and the gang split has to be altered, in this scenario i cant see any issue as the gang split clearly shows she is working
But the first option is preferable, and still geniune, and of more use to me personally

Mbsun

Fwiw, common law- been together 9 years, live together, own a house together, have a daughter together, but not married

xylophone

common law

https://www.bbc.co.uk/news/uk-42134722

uknick

Mbsun wrote: »

Fwiw, common law- been together 9 years, live together, own a house together, have a daughter together, but not married

Just to reiterate what was said previously, common law has no legal status in the UK. It is a term used socially to describe a relationship and does not allow the parties to have any rights or obligations as defined by marriage or civil partnerships, e.g. the transfer of assets without tax liabilities between spouses/civil partners.

If you are paying her for the work she does then have to be either an employee or a sub contractor. If she is a sub contractor then she has to be registered as self employed with HMRC. But, if she is only working for you she'll probably fall foul of the IR35 rules, i.e. she is really an employee and as such you will have to pay employers' tax obligations; national insurance and possibly pension scheme liabilities.

If she is your business partner and the partnership is formalized, then I think you might need your clients to pay the partnership (I could be wrong on this aspect and would welcome better informed input) and you then split the income in accordance with your formal business agreement with her.

If you are serious in proceeding with this it might be worth seeing an accountant for an hour to allow them to explain the pros and cons of what you want to do. Usually an accountant will give you an hour for free if they think you might sign up with them to manage your business affairs. If not an hour should only cost a £100 or so, and might save you far more if you fall foul of the HMRC rules.

hopon

How are "the gang" currently paid by your customers - do you each invoice individually & directly to them? If so then she can register as self employed and as a subcontractor and can invoice them for her proportion - you just reduce your rate to take it in to account.

A partnership would work out but again requires a new registration for HMRC of both the partnership and her as an individual. Your customers would pay the partnership and you would split the income.

You could employ her, this will require registering as an employer and does introduce other aspects - minimum wage, auto enrollment (pensions), sick pay, holiday pay etc.

You could form a ltd company with both of you down as directors & shareholders. Tbh if you have been consistently been earning circa £52k a year then I'm surprised you haven't already been advised to go this route as you would have been able to save thousands over the years, dividend tax has eaten in to some of those savings unfortunately.