Employing a family member

DoctorStrange

It's pretty obvious you're looking for a tax dodge. You've used quotation marks when using  "employed", you've said the sole reason is to "take advantage" of the tax allowance, you've said it's too reduce your 40% burden etc.

So what you've suggested is basically illegal.

That said, it wouldn't be too hard to make it legal (i.e. by giving her an actual job). Does she have any relevant skills - secretarial, accounting/bookkeeping, IT etc.? If so, I'd explore this options.

To answer your other question about whether HMRC would care - why wouldn't they? If you've employed your wife on £100 an hour to be "on call" (for what?) then they'll of course care if it looks like "aggressive tax avoidance". After all, that's what they're (properly) paid to do....

LilElvis

BoGoF said:

Comms69 wrote: »

Well the reality is that you can employ anyone to do anything basically.


Some people are paid to answer phones, some paid to do social media, etc. So yes you can.

Whilst that may be true I think OP is asking more from a tax angle and HMRC would have issues if the wife was getting paid more than the going hourly rate to do 'a bit paperwork'.

Why would HMRC have any issue? They have no idea of an employee's job description/ hours worked/ pay rate - simply the amount declared as paid and the amounts deducted and paid over to them. A CEO could be paid £1k or £10 million and they won't be interested because it has nothing to do with them. Ditto an "admin assistant".

LilElvis

DoctorStrange said:

It's pretty obvious you're looking for a tax dodge. You've used quotation marks when using  "employed", you've said the sole reason is to "take advantage" of the tax allowance, you've said it's too reduce your 40% burden etc.

So what you've suggested is basically illegal.

That said, it wouldn't be too hard to make it legal (i.e. by giving her an actual job). Does she have any relevant skills - secretarial, accounting/bookkeeping, IT etc.? If so, I'd explore this options.

To answer your other question about whether HMRC would care - why wouldn't they? If you've employed your wife on £100 an hour to be "on call" (for what?) then they'll of course care if it looks like "aggressive tax avoidance". After all, that's what they're (properly) paid to do....

Illegal in what way? It isn't.

Of course they will look into it? They absolutely won't - they struggle to investigate, let alone prosecute, genuine tax avoidance when it runs to millions, and that's from personal experience.

You're posting about what you think HMRC should do as opposed to what they actually do in reality.

DoctorStrange

LilElvis said:

DoctorStrange said:

It's pretty obvious you're looking for a tax dodge. You've used quotation marks when using  "employed", you've said the sole reason is to "take advantage" of the tax allowance, you've said it's too reduce your 40% burden etc.

So what you've suggested is basically illegal.

That said, it wouldn't be too hard to make it legal (i.e. by giving her an actual job). Does she have any relevant skills - secretarial, accounting/bookkeeping, IT etc.? If so, I'd explore this options.

To answer your other question about whether HMRC would care - why wouldn't they? If you've employed your wife on £100 an hour to be "on call" (for what?) then they'll of course care if it looks like "aggressive tax avoidance". After all, that's what they're (properly) paid to do....

Illegal in what way? It isn't.

Of course they will look into it? They absolutely won't - they struggle to investigate, let alone prosecute, genuine tax avoidance when it runs to millions, and that's from personal experience.

You're posting about what you think HMRC should do as opposed to what they actually do in reality.

Illegal as in he wants to create a fake job and transfer monies to his wife by pretending to pay a wage for work not done, with the express intention of artificially lowering his own tax liabilities.

And I never said they will investigate; the question was whether they'd "care" about it which, of course, they would.
Whether they'll ever find out out about it is another question entirely...

stig

There are two separate issues here.

1. can you pay your wife however much you want as an employee? Yes of course, that’s between employer and employee - so long as you follow the various rules for employers (PAYE tax and NIC, duty of care, etc.)

2. Can your business claim the wage paid to your wife as a legitimate business expense? No, if it’s not being paid for business purposes  but to reduce your own tax bill. Wages, like all other business expenses must be incurred for the purpose of the business to be a deductible expense. 

as others have said, if you’re not greedy and don’t pay a wage which is blatantly disproportionate to her qualifications and availability, you’ll probably not get caught out - that doesn’t make it a legitimate business expense however, any more than claiming a family holiday is a business trip.

JohnDorian

DoctorStrange said:

LilElvis said:

DoctorStrange said:

It's pretty obvious you're looking for a tax dodge. You've used quotation marks when using  "employed", you've said the sole reason is to "take advantage" of the tax allowance, you've said it's too reduce your 40% burden etc.

So what you've suggested is basically illegal.

That said, it wouldn't be too hard to make it legal (i.e. by giving her an actual job). Does she have any relevant skills - secretarial, accounting/bookkeeping, IT etc.? If so, I'd explore this options.

To answer your other question about whether HMRC would care - why wouldn't they? If you've employed your wife on £100 an hour to be "on call" (for what?) then they'll of course care if it looks like "aggressive tax avoidance". After all, that's what they're (properly) paid to do....

Illegal in what way? It isn't.

Of course they will look into it? They absolutely won't - they struggle to investigate, let alone prosecute, genuine tax avoidance when it runs to millions, and that's from personal experience.

You're posting about what you think HMRC should do as opposed to what they actually do in reality.

Illegal as in he wants to create a fake job and transfer monies to his wife by pretending to pay a wage for work not done, with the express intention of artificially lowering his own tax liabilities.

And I never said they will investigate; the question was whether they'd "care" about it which, of course, they would.
Whether they'll ever find out out about it is another question entirely...

It’s not illegal though. Not sure why you keep on using that word. 

gettingtheresometime

The way I read the OP was that he wants to 'employ' his wife for a salary of £X thus reducing his salary by £x so that he minimise his tax bill.

what is illegal about that? Come to think of it so long the right tax/ni is paid on both salaries why would HMRC be even remotely interested.

BoGoF

gettingtheresometime said:

The way I read the OP was that he wants to 'employ' his wife for a salary of £X thus reducing his salary by £x so that he minimise his tax bill.

what is illegal about that? Come to think of it so long the right tax/ni is paid on both salaries why would HMRC be even remotely interested.

Of course they would be interested if they are losing 40% tax on the fictional salary. There is case law where HMRC have successfully disallowed excessive wages paid to family members.

JohnDorian

BoGoF said:

gettingtheresometime said:

The way I read the OP was that he wants to 'employ' his wife for a salary of £X thus reducing his salary by £x so that he minimise his tax bill.

what is illegal about that? Come to think of it so long the right tax/ni is paid on both salaries why would HMRC be even remotely interested.

Of course they would be interested if they are losing 40% tax on the fictional salary. There is case law where HMRC have successfully disallowed excessive wages paid to family members.

Which cases would these be? I’d be very interested to read them and more about how HMRC have acquired the power to dictate how much a business owner pays him/herself and who they can employ.

Malthusian

LilElvis said:

Illegal in what way? It isn't.

It is illegal - in the sense of contrary to HMRC rules - to pay someone a salary when they aren't actually doing any work and pay corporation tax on that basis. Expenses must be wholly and exclusively for the purpose of the business to be tax deductable.

As DoctorStrange said, if she does do some work - e.g. opening letters or answering the phone - he can pay her a salary.

Why not make her a shareholder and pay her dividends, avoiding the question entirely?

The usual reason for paying a wife a salary, as opposed to dividends, is to ensure she has a full NI record, which only requires a salary of £8,424pa at current rates. That is easy to justify on the basis of occasional admin work.