Sole trader paying wife to lower tax

EnPointe

premiumz said:

DullGreyGuy said:

You can, as long as she is actually doing the work to earn the money and you aren't overpaying her... its naturally a bit of a red flag that people pay partners £12k to send 1 email a quarter etc. 

She works around 5 hours a day. So if I can pay her, should she send me an invoice or will it be okay to just pay her straight from the business bank account?

Thanks

you run the risk of falling foul of self employed  vs  worker/ employee  stuff. 

 you  need proper , professional advice on the best way forward, as has been suggested given her involvement making her a Partner in partnership or you both becoming  directors of a company  may be more appropraite 

uknick

IR35 doesn't affect sole traders, which I assume she's trading as.

EnPointe

uknick said:

IR35 doesn't affect sole traders, which I assume she's trading as.

it's more aobut the OP's business claiming  the  wife is 'self employed'  when  it sounds like she might  meet the tests to be a worker or employee  

vs  her being a Partner in a Partnership or a Director of the limited company

uknick

EnPointe said:

uknick said:

IR35 doesn't affect sole traders, which I assume she's trading as.

it;s more aobut the IOP;s business claiming  the  wife is 'self employed;  when  it sounds like she might  meet the tests to be a worker or employee  

vs  her being a Partner in a Partnership or a Director of the limited company

If she's already doing self employed work for others, I'm not sure she'll fall foul of the employee/contractor argument as long as she declares it on her self assessment and she's paying the requisite NI and income tax.

There could be a case if it turns out, say, 95% of her work and income is for him, but again I'm not sure if HMRC would pursue this.  This is all about tax recovery and if HMRC aren't out of pocket I can't see them being interested.

 

SVaz

How is she getting NI credits?
If not via child benefit or voluntary contributions then employing her between the LeL and primary threshold is the obvious answer,  she gets credited without either of you shelling out.
Not to mention that she will be able to put more than the maximum £2880/£3600 into a pension 😉
That the reason I’m increasing my wife’s pay to £7k,  so she can put most of it in her pension and I save £1960 in tax/NI. 

EnPointe

uknick said:

EnPointe said:

uknick said:

IR35 doesn't affect sole traders, which I assume she's trading as.

it;s more aobut the IOP;s business claiming  the  wife is 'self employed;  when  it sounds like she might  meet the tests to be a worker or employee  

vs  her being a Partner in a Partnership or a Director of the limited company

If she's already doing self employed work for others, I'm not sure she'll fall foul of the employee/contractor argument as long as she declares it on her self assessment and she's paying the requisite NI and income tax.

There could be a case if it turns out, say, 95% of her work and income is for him, but again I'm not sure if HMRC would pursue this.  This is all about tax recovery and if HMRC aren't out of pocket I can't see them being interested.

 

COuld still be a worker or  an employee on that Contract, if  other tests are not  being met 

having more than one employer  does not automagically make one self employed , it can however provide  evidence to suggest that  a questionable role  is a self employed  one  if  similar work is done for others , there are of course the other tests ref direction, substitution etc etc 

sheramber

Do we know  know what self employed work the wife does.? It may be totally different to the work she does for the OP.

uknick

EnPointe said:

uknick said:

EnPointe said:

uknick said:

IR35 doesn't affect sole traders, which I assume she's trading as.

it;s more aobut the IOP;s business claiming  the  wife is 'self employed;  when  it sounds like she might  meet the tests to be a worker or employee  

vs  her being a Partner in a Partnership or a Director of the limited company

If she's already doing self employed work for others, I'm not sure she'll fall foul of the employee/contractor argument as long as she declares it on her self assessment and she's paying the requisite NI and income tax.

There could be a case if it turns out, say, 95% of her work and income is for him, but again I'm not sure if HMRC would pursue this.  This is all about tax recovery and if HMRC aren't out of pocket I can't see them being interested.

 

COuld still be a worker or  an employee on that Contract, if  other tests are not  being met 

having more than one employer  does not automagically make one self employed , it can however provide  evidence to suggest that  a questionable role  is a self employed  one  if  similar work is done for others , there are of course the other tests ref direction, substitution etc etc 

Agreed.  But, it's not too hard to put an agreement in place that would pass the HMRC self employed/employed online test.  Whether it would pass HMRC scrutiny if they were to examine the arrangements is another question as it is a wife working for her husband.  But, if you do the agreement right, I've not seen anything in the rules disallowing that working arrangement.  But, as I said previously, she would have to show this is supplemental to her other self employed work.