Sole trader -Paying the mrs/partner

uknick

TheCyclingProgrammer wrote: »

So OP is not confused, IR35 not relevant here, it doesn’t apply to self employed people, only those working through intermediaries. The rest is correct though.

Thanks for correcting that.

Mbsun

Yes i think thats the crux of it
TO WHAT EXTENT DOES HER PAY HAVE TO REFLECT ACTUAL WORK

00ec25

Mbsun wrote: »

Yes i think thats the crux of it
TO WHAT EXTENT DOES HER PAY HAVE TO REFLECT ACTUAL WORK

it has to reflect it exactly
she would need to be paid at a realistic rate for a labourer and she would need to evidence the hours she worked
(please don't ignore the earlier comments regarding employee v self employed status)

even though you are not married, there is an obvious connection between the 2 of you and so you would most probably come within the remit of settlements legislation which means HMRC can overturn a pay which is "bounteous", ie above the going rate, if that rate of pay was simply done to move money from a higher to a lower rate tax payer where both taxpayers are otherwise closely connected - such as living together as man and wife with children

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4325

Mbsun

Ok, but
I am on (on average) £40-45 per hour, our labourer is on £20-25
(Please dont think of my job as 8 hours per day 5 days per week 52 weeks a year)
There is no going rate in reality, a search on job sites would suggest £8-10 ph a labourer, £15-18 ph for a bricklayer, but these are generally agency and generally only attract applicants who are unable to do either the work we do, and who cannot do it to the same quality and quantity.

Its pay based on ability, how could hmrc access that?

00ec25

Mbsun wrote: »

Ok, but
I am on (on average) £40-45 per hour, our labourer is on £20-25
(Please dont think of my job as 8 hours per day 5 days per week 52 weeks a year)
There is no going rate in reality, a search on job sites would suggest £8-10 ph a labourer, £15-18 ph for a bricklayer, but these are generally agency and generally only attract applicants who are unable to do either the work we do, and who cannot do it to the same quality and quantity.

Its pay based on ability, how could hmrc access that?

you keep digging the same hole

what proof can you offer that your inexperienced, untested novice "wife" can operate at the elevated rates you think you want to pay her?

anyway you still have not sorted out who is going to pay her - your bricklaying sub-contractor client/gangmaster because she is one of the gang as a self employed person or yourself, because she is your direct employee.

I doubt the gangmaster would offer her the rates you imply and as your employee, her rate would need to stand up to settlements legislation and, by the sounds of it, should be nearer that of an unskilled apprentice?

Mbsun

Sorry i cant work out how to quote and reply to each part, so my first paragraph is in reply to your first, 2nd to 2nd etc

The only proof i can offer, is that my labourer was also an unskilled untested novice, and it didnt take more than a week or 2 to make him what he is. So my question then would be if her wage is unjustifiable, neither would be his, and i can prove what he has been paid

I thought this was clear, the subcontractor i work for would be paying her, she would be part of our team, and would be paid in the same way iam, the other bricklayer is, and the labourer is. Neither of the other 2 is my employee, nor would be she.

The gamgmaster(assuming you meam brickwork subcontractor) has zero say in who gets paid what, he only sets the price per m2 (or an hourly rate also but we do not work on hourly rate and turn this work down), it is up to our team to divide up the pot as we see fit.

BoGoF

You say it's pay based on ability - are you saying your wife could carry out exactly the same tasks as the other labourer? I very much doubt that.

Mbsun

Why? It would be sexist to say she cannot because she is a women lol
In seriousness, yes with the same training i gave our labourer
What also needs to be understood as a good labourer doesnt just fetch and carry, ours points up, and spreads our bed joint as often as he can, and there is no physical reason she could not match him inside a month, especially as the reason my labourer does this is my teaching

In some ways i would liken this to an old plumber wanting to bring his mrs with him as a plumbers mate (but self employed)he may not gross much more, but hell it will make his life easier (assuming they get on), and will probably add longevity to his career. At i minimum he worth would be similar, at best completely tangible with a higher gross income between the gang.

But what you havd to bear in mind is not all work is equal, prices differ, houses differ, sites differ. Its possible to be a better gang and earn less, or a weaker gang and earn more, if all depends on luck tbh

So many variables in this, if i cant explain it fully on here, i cant see what chance i have if hmrc come knocking tbh
We need a second part time labourer and i could do with a new right arm,, and she needs a part time job.
Seems to me unless i can prove every movement hmrc will just tell me i can split her minimum wage at a proveable amount of hours (a big problem given the lack of clocking in on site). So a no go

00ec25

Please confirm what is the contractual relationship between your "gang" and the brick subby. Do you each individually have your own contracts with the subby and you invoice the subby individually or does your "gang" have a collective single contract with the subby and submits a single invoice covering all the work done at the rate/m2?

to have a 39/22 split implies there are 2 brickies and 1 labourer 39+39+22 = 100%. What is not clear is who pays who and how

if paid individually, I doubt the others will agree to a pay cut so her money would have to come out of your 39% and what she gets would need to be a lot less than you get as a skilled brickie.
If paid as a single (collective) gang, adding her into it as a second labourer means the % split can't stay as 39/39/22 at which point each person gets a lower share so the only way it would succeed is if the gang does more work overall.

tebthereb

Pennwise, I don’t follow the comment about IR35. Why is this relevant to the current situation or my suggested use of a partnership?

I don’t want to hold a partnership out as the magic bullet here (we don’t know enough to advise properly on the best solution) but I am not sure why it is not the answer to the issue of a partner having to do work.

A partner does not have to do any work. HMRC accept profit share can be unrelated to capital investment, time spent etc.. It just needs to follow the partnership agreement.

I also don’t follow why settlements legislation would be in point with a partnership between an unmarried (or even married) couple provided nothing stupid is done like no entitlement to capital or attaching conditions to “wife” income.

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem4215

Again, I would recommend professional advice if there is any real money at stake.