Tax free trading allowance

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Roysee
Roysee Posts: 12 Forumite
Hi there
My daughter runs a btl business making profits. I maintain her accounts and file her tax return. Up to now I have done these services gratis! However I am wondering if I can legitimately invoice her for the services so that she can offset my charges against her btl income and I can regard my income as falling within the £1,000 trading allowance. Her business is neither a company or a partnership.

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  • jimmo
    jimmo Posts: 2,282 Forumite
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    First of all, it is perfectly legitimate for someone operating a lettings business to pay people to work for them and, in all probability if your daughter claimed Fees of £1000 a year it will be accepted by HMRC without question.
    However if they did decide to make an enquiry I see a number of potential problems. In this case, you are the letter's father and HMRC are very wary of family relationships between payer and payee.
    First problem: Are you an employee of your daughter or an independent trader? Unless you have other, non family, clients paying you for a similar service I would say that the odds are you will be her employee. If so, no trading allowance for you and she may well have to operate PAYE on your wages.
    Second problem: How much time do you spend on this work and how much would be reasonable for her to pay you? If you are an employee that has to be at least minimum wage. I see from your earlier posts that you have BTL properties of your own so you presumably have some expertise in this field but are not professionally qualified so payments at a rate comparable to estate agents couldn't be justified.
    Third problem: As you, yourself have BTLs, is your daughter's business genuinely her own or has it been funded by the bank of mum and dad?
    Are the profits hers on paper but yours in reality?
  • Roysee
    Roysee Posts: 12 Forumite
    edited 7 July 2018 at 11:08AM
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    Thanks for your advice. Prior to retirment I was a qualified accountant but this has long since lapsed. I genuinely do do my daughters accounts and tax returns and her btl business has absolutely nothing to do with me and I haven't needed to provide any funds for her! If I did not do her accounts she would have to go to an accountant firm and pay their rates so I suppose you could say I am providing a service for a reduced fee. How can I prove I am not her employee, would a simple contract for accounting services suffice and an invoice?
  • Pennywise
    Pennywise Posts: 13,468 Forumite
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    You'd have to register with HMRC for money laundering regulations and maybe also for data protection regulations - there are rules/regulations which apply to book-keepers and accounting service providers.

    If you have unused personal tax allowances, then as suggested above, may be able to achieve the same result by merely being an employee - yes, there'd be PAYE/RTI requirements, but you'd avoid the money laundering and data protection issues.
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