Sole trader - move revenue and costs to lowest earner?

ndharris

Hi there,

I have a website which is earning some reasonable revenue. I am currently running all the costs and revenues through my bank account and I pay tax on the profit via PAYE. I am earning £70k in my job. My wife is earning £24k in her job. The website is making £20k profit per year.

It looks like moving the website's finances (costs and revenue) to the lower earner (my wife) would lead to a saving on tax. Good idea? Am I legally allowed to do this?

Thanks,

Neil.

Pennywise

You'd have to move everything over to your wife, i.e. not just the costs and revenue, but also the legal stuff, such as domain registrations, any IP rights, sell her any stocks/equipment, etc., and the income/expenses would have to be in her name, so you'd also have to change any supplier accounts, paypal accounts, etc. The worth/income is then legally hers, so if your marriage broke up, it's hers not yours!

How about forming a partnership instead? You can then share profits in whichever proportion you mutually agree but the business itself, i.e. website domain, stock, equipment, etc are jointly owned. Best of both worlds really. Alternatively, maybe even a limited company where you're both directors and shareholders?

What does your accountant say? There are lots of pros/cons of the various options and a few tax-traps to avoid, so best to take their advice rather than trying to DIY.

ndharris

Hi Pennywise,

Thanks for the prompt and very useful reply. I have just read up on partnerships, and yes this looks like the perfect solution.

Thanks again.

Neil.

martindow

Pennywise wrote: »

How about forming a partnership instead? You can then share profits in whichever proportion you mutually agree but the business itself, i.e. website domain, stock, equipment, etc are jointly owned. Best of both worlds really.

Is that really so? I thought that the percentage split had to reflect the work being done by each person otherwise HMRC would see it as a ploy to avoid tax. I think they might take a dim view of a 99:1 split if the person doing the bulk of the work is claiming to be 1%.