My DW wants to start a self employed ironing business. Can I be her customer?

phillw

prowla said:

If, say, her business was selling cars; would it be wrong if she gave you a car from the business for nothing?

Instead her business is ironing; now is it wrong if she charges you for the service?

Depends on the type of business, if it's sole trader there is no difference. If it's a limited company then she shouldn't give away company assets because they belong to the company, she can give away her services because the company doesn't own her.

Grumpy_chap

michaels said:

Grumpy_chap said:

I am starting to like the idea of employing my wife for services in the home.  Can my wife also employ me for services?

The thing is, we live in a house down by the green and would really rather have one of the larger houses up the hill with cinema room, swimming pool and tennis courts.  Trouble is, based upon my earned income, the bank will not give me the mortgage.

Now if I take my earned income and then employ my wife as a sole-trader for, say £40k/year, our household income (as per SA302s) has just jumped up.  If my wife then employs me as a sole-trader as well, say £30k/year, another big jump in SA302 declaration.  I can now use my increased earnings to buy more services from my wife and thus, she can buy more from me.  I am sure that we can generate the sufficient turnover to qualify for one of those big mortgages that will allow us to have one of the big houses up the hill.  

What could possibly go wrong?

I fail to see how this idea is any different to the OP's idea, except I have taken it to a greater level with the repeated loops.
I'm off to Foxtons

But when the bank asked you to fill in the section on the application form about normal expenditure this would include the money spent on employing your DW so your disposable income would be the same?

I was really extrapolating your scenario to another equally contrived situation to demonstrate that there is nothing "normal" about me buying services from my wife or her buying services from me.  Whether the contrived transactions are to create the illusion of income to gain access to mortgage funds, or whether the transactions are contrived to qualify for some tax and / or pension benefit, the transactions are still totally false and contrived, I would even say fraudulent.

Jeremy535897

phillw said:

michaels said:
But when the bank asked you to fill in the section on the application form about normal expenditure this would include the money spent on employing your DW so your disposable income would be the same?

What part of that sounded like normal expenditure? ;-)
It sounds like the opposite of tax evasion. HMRC will be happy to take the extra funds.

Tax invasion then. A whole new concept.

michaels

Grumpy_chap said:

michaels said:

Grumpy_chap said:

I am starting to like the idea of employing my wife for services in the home.  Can my wife also employ me for services?

The thing is, we live in a house down by the green and would really rather have one of the larger houses up the hill with cinema room, swimming pool and tennis courts.  Trouble is, based upon my earned income, the bank will not give me the mortgage.

Now if I take my earned income and then employ my wife as a sole-trader for, say £40k/year, our household income (as per SA302s) has just jumped up.  If my wife then employs me as a sole-trader as well, say £30k/year, another big jump in SA302 declaration.  I can now use my increased earnings to buy more services from my wife and thus, she can buy more from me.  I am sure that we can generate the sufficient turnover to qualify for one of those big mortgages that will allow us to have one of the big houses up the hill.  

What could possibly go wrong?

I fail to see how this idea is any different to the OP's idea, except I have taken it to a greater level with the repeated loops.
I'm off to Foxtons

But when the bank asked you to fill in the section on the application form about normal expenditure this would include the money spent on employing your DW so your disposable income would be the same?

I was really extrapolating your scenario to another equally contrived situation to demonstrate that there is nothing "normal" about me buying services from my wife or her buying services from me.  Whether the contrived transactions are to create the illusion of income to gain access to mortgage funds, or whether the transactions are contrived to qualify for some tax and / or pension benefit, the transactions are still totally false and contrived, I would even say fraudulent.

So it is fraudulent for me to use my wife's ironing service but perfectly legal for me to use my neighbour's ironing service?  If my DW was running an ironing service and had 100 customers and I decided I no longer wanted to iron my own shirts but use a service, would it be ok for me to pay her to use her service?
What if she had only 99 other customers?  or 49? or 9?

At what point would it become 'wrong' for me to use her service?  What if she had 100 customers but they stopped coming during covid as they were working from home and I went from being 1 customer in 100 to her only customer - would the business suddenly become null and void?

Cash-Strapped.T32

I don't think it's the ironing that is the thing if you follow the logic of those saying nope. You say that ironing is economic activity, but really, it is taking on somebody else's responsibility that is the economic activity.
So your ironing is your problem, but give that problem, that responsibility to an outsider in return for money and now it's economic activity.

It could be ironing, childcare, window cleaning, whatever.
Consider exactly the same question as you posed originally, but now make her a window cleaner. Same answer I would think.
At least, that is how I read the counter argument.

Grumpy_chap

Even if your wife had an ironing service with over a billion other customers, it would still make no sense for you to buy her services as you would be doing so from your shared assets and that part paid by you to your wife would be diminished by tax before returning to the shared assets.

Tax invasion, as @Jeremy535897 put it.

michaels

Grumpy_chap said:

Even if your wife had an ironing service with over a billion other customers, it would still make no sense for you to buy her services as you would be doing so from your shared assets and that part paid by you to your wife would be diminished by tax before returning to the shared assets.

Tax invasion, as @Jeremy535897 put it.

So are you suggesting I ask her to do it 'cash in hand' to avoid paying tax - now that sounds like evasion to me

Grumpy_chap

michaels said:

So are you suggesting I ask her to do it 'cash in hand' to avoid paying tax - now that sounds like evasion to me

NO.

As I understand it, neither this thread nor your other thread in the Pensions forum is actually about your wife starting an ironing business.  If it was, maybe the "Small Biz & Charity" thread would be more suitable.

As I have understood your two threads on this subject, it is all about the possibility of a husband buying "services" from his wife within the marital home to create the illusion of an earned income for the wife such that the wife can then make pension contributions, which are offset against tax so no tax liability arising from the income that has been "earned" by the wife.  The driver is that husband already makes maximum pension contributions.

The key word is "illusion" - it is all just contrived transactions to support a tax dodge and, hence fraud.  It is not important whether the contrived transactions and the illusion of an income they create support pension contributions or a mortgage so I can get the big house up the hill - it is all just contrived transactions for the purpose of creating the illusion of income and fraud.

@Cash-Strapped.T32 said, it is not important what "services" the wife sells to the husband, it is the claimed "economic activity" where none exists.

michaels

And I don't see why it is an illusion for me to buy a service from someone I happen to be married to when it is not an illusion if I buy exactly the same service from anyone else.  Or are you suggesting that it is my DW's wifely duty to iron for me whilst I go out and do a manly job to bring in an income and provide for us?

Grumpy_chap

michaels said:

And I don't see why it is an illusion for me to buy a service from someone I happen to be married to when it is not an illusion if I buy exactly the same service from anyone else.  Or are you suggesting that it is my DW's wifely duty to iron for me whilst I go out and do a manly job to bring in an income and provide for us?

No, and I think you well know that is not what I am saying.

Simply, that in creating this illusion of a transaction, there is not a real transaction behind it.  Maybe it needs to be looked like the transactions between group or linked companies, which are accounted for differently to transactions between a group of companies and true earned income from external customers.  A husband would not be the external customer of a wife, or vice-versa.