Paying earnings into wife's account

longylong

I have recently started doing self employed work on top of a normal 37 hour employed contract. I have registered for self assessment. My wife is also self employed only under her own name/company but is unlikely to earn anywhere near the £12,570 before she has to pay any tax. 

My question is, When I request a payment from a client from my business can I have the money paid into her account to take advantage of her lower earnings before she pays any tax despite her not stepping foot into my clients property to do any of the work she would be getting paid for? Or would she send the invoice to them from her own company despite not having done the work herself.

We want to stay above the the law and want to confirm that the above is not a form of tax avoidance etc.


On a side note if anyone knows the answer.

I registered myself as self employed at the end of 2020. As of the end of this tax year I have earned £900. Its my understanding that I can earn up to £1000 which is classed as a hobby and therefore do not need to declare the income.

As I have had to purchase some clothing, equipment and travel to jobs I assume I can claim some of the VAT back on those products/millage but can I claim the VAT back if I don't declare the earnings in self assessment because its not over £1000 for the year?

Thanks in advance

[Deleted User]

First question - a non-starter for too many reasons to mention but most of which come under tax avoidance. Your second paragraph has neatly described a few of the reasons.

Second question - are you registered for VAT. If not, you cannot claim back the VAT. If you are, and on those earnings it would be hard to justify, you would have to charge VAT on your invoices.

Jeremy535897

If your self employment is likely to take off in 2021/22, consider whether to make your wife a partner (sooner rather than later), as you can then allocate profits between each other in a tax efficient manner.

She must agree to becoming a partner, and accept that if your business goes bust, she could be liable as a partner for any business debts due.

longylong

[Deleted User] said:

First question - a non-starter for too many reasons to mention but most of which come under tax avoidance. Your second paragraph has neatly described a few of the reasons.

Second question - are you registered for VAT. If not, you cannot claim back the VAT. If you are, and on those earnings it would be hard to justify, you would have to charge VAT on your invoices.

Thanks for your reply. It seems this was an ill advised bit of information to have my wife paid for work I have done. We had been told about gifting it to her but looks like its best not to or that just isn't an option.

Secondly, no I am not VAT registered so understand I can't claim the VAT back on goods purchased.

Thanks

longylong

Jeremy535897 said:

If your self employment is likely to take off in 2021/22, consider whether to make your wife a partner (sooner rather than later), as you can then allocate profits between each other in a tax efficient manner.

She must agree to becoming a partner, and accept that if your business goes bust, she could be liable as a partner for any business debts due.

Thanks.

I will be earning more this year than I did last year as last year wasn't a full year of potential income.

We had been advised that two separate companies/accounts would be better than a joint business. Are you able to explain briefly the benefits of having a joint business if possible please?

Thank you 

Jeremy535897

longylong said:

Jeremy535897 said:

If your self employment is likely to take off in 2021/22, consider whether to make your wife a partner (sooner rather than later), as you can then allocate profits between each other in a tax efficient manner.

She must agree to becoming a partner, and accept that if your business goes bust, she could be liable as a partner for any business debts due.

Thanks.

I will be earning more this year than I did last year as last year wasn't a full year of potential income.

We had been advised that two separate companies/accounts would be better than a joint business. Are you able to explain briefly the benefits of having a joint business if possible please?

Thank you 

As explained above, a business has to charge for the work it does, not the work a different business does. If you have two businesses, one owned by you, and one owned by your wife, your wife's business cannot bill your work, unless you become an employee of her business.

If you have a partnership, you can do 99% of the work, and your wife can take 99% of the profits, if that is what you both want.

sheramber

Your wife would  report her partnership share on the partner pages on her return and she would still have her own accounts for her own business and complete self employed pages for that.