Join BKN

Join BKN
Join BKN

Join BKN

Post Info TOPIC: Paying wife a wage


Member

Status: Offline
Posts: 15
Date:
Paying wife a wage


Hello there, I wonder if anyone can help me out on my question.

My husband is self employed (sole proprietor).  However, I do work for the business doing book-keeping, typing quotes, sending emails etc etc.

I know it is possible to pay your wife a salary and this is classified as an expense.  My question is whether this can be paid to me on a self-employed basis.  I am currently self employed in my own right at the moment (A small jewellery business which has now ceased).  In fact my personal earnings for tax year up to 5/4/2011 is very small, and it seems wise to take advantage of my tax allowance, but can this be done on a gross basis and not PAYE?

Regards

K

__________________


Guru

Status: Offline
Posts: 1226
Date:

Hi K

Dont see any difference between being paid as self employed as opposed to salary provided you are doing some work and providing you are using your tax free allowance of £5715.

Normally only an issue charging to one person on self employed/ltd company basis if there is IR35 issues but as there is no loss of tax/NIC to HMRC given the level of monies involved dont see it being a problem.

MarkS



__________________

Providing bookkeeping, accounting and taxation services to small and medium sized businesses.



Expert

Status: Offline
Posts: 2198
Date:

Hi K

The only thing I can see making it slightly complicated, if you went the self employed route, is that you would need to register with HMRC for Money Laundering Regulations purposes. (There is a cost to register £120 I believe). As an employee you do not need to do this but if you exceed the NI threshold then you have the payroll administration to deal with (more HMRC bureaucracy!!).

In either case they are both expenses for the company

Bill

-- Edited by Wella on Saturday 19th of February 2011 04:46:28 PM

__________________

 

 



Forum Moderator & Expert

Status: Offline
Posts: 8529
Date:

Surely if the husband would have gone into 40% tax bracket then paying one's wife a salary which would have been paid to yourself means that not only is there a tax saving due to use of the wifes tax allowance but also paying tax at the lower rate.

The test must be that the payment is wholly and exclusively for the purpose of the trade and NOT just to avoid or reduce tax liability.

For reference see BIM33775 here :

http://www.hmrc.gov.uk/manuals/bimmanual/BIM37735.htm

This goes pre IR35 as I remember such arguments going back to the early 90's and I believe that they had been occuring long before that.

I know that plenty of people do pay their wife and often this is on the back of their accountants advice. Personally it is not advice that I would give unless the partner was shown to be making a positive contribution to the business and the remuneration given was commensurate with the services offered.

In your case Kerry the rates that would be paid for bookkeeping / typeing services in the open market if such was being performed by someone not connected with the business should be the rates used in calculating the salary.

kind regards,

Shaun.

__________________

Responses are not meant as a substitute for professional advice. Answers are intended as outline only and in all situations the advice of a qualified professional should be sought before acting on any response given.

gbm


Guru

Status: Offline
Posts: 896
Date:

Hi Kerry,

There are obviously many factors which are required to give a proper answer, and Shaun does make a valid point about the commercial nature of the wages. However, if justifiable, I would look at going over the LEL; as you have ceased self employment (and presuming it's your only income), you could be paid up to £109 p/w which would qualify for tax relief in your husband's business and it would also rack up contributions towards the state pension.

Another alternative may be to look at a partnership.



__________________

 

Regards,
Nick

Website: www.gbmaccounts.co.uk
Twitter

Factsheet | Starting a Business

 



Member

Status: Offline
Posts: 15
Date:

Thanks for all your comments it's definitely food for thought.

I do not have a problem in arguing that the payment is wholly and exclusively for the purpose of the trade and NOT just to avoid or reduce tax liability. I work quite a lot of hours doing the jobs
that my husband simply can't do (he is computer illiterate for a start!). I'm probably only talking about a payment of roughly £5000 a year and I'm sure for the hours I put in, this is well within market
value!

However the IR35 issue concerns me. I'm not sure if HMRC would consider me an 'employee' or working on my account. I remember from my law days the 'employee' definition checklist, one being
whether there is any form of control! (I could make a joke about that but I will refrain).

Bill to clarify, why do you think I need to register with HMRC for Money Laundering Regulations purposes?

Partnership is an option, I suppose I'm just trying to make things simple (!)

Thank you

Kerry





__________________


Expert

Status: Offline
Posts: 1569
Date:

MissyMay wrote:

Bill to clarify, why do you think I need to register with HMRC for Money Laundering Regulations purposes?


If you were an employee then you wouldn't need to register for MLR, but if you were self-employed you would have to. Them's the rules.

 



__________________

Never buy black socks from a normal shop. They shaft you every time.

http://www.smbps.co.uk/



Forum Moderator & Expert

Status: Offline
Posts: 8529
Date:

Hi Peasie, Hi Kerry,

On the matter of MLR and employment rather than self employment have a read of this months ICB newsletter that has an article on MLR that might be of interest.

here is the link :

http://www.bookkeepers.org.uk/News/1231

The article is in the letter from the chief executive on the left hand side under "Talking of Sledgehammers". There's a bit in there about how the Money Laundering Regulations (MLR) also affected members in employment, rather than just those in practice.

Kind regards,

Shaun.



__________________

Responses are not meant as a substitute for professional advice. Answers are intended as outline only and in all situations the advice of a qualified professional should be sought before acting on any response given.



Expert

Status: Offline
Posts: 1569
Date:

From reading that it doesn't affect what I wrote above as regards registration for MLR.
It does make me think though, if some self employed bookkeepers are unaware of the MLR what chance is there of employees being aware of it.

__________________

Never buy black socks from a normal shop. They shaft you every time.

http://www.smbps.co.uk/



Expert

Status: Offline
Posts: 2198
Date:

Hi Shaun

How you doin'?

I read that too, very interesting. I suppose it has always been that way, as you have a responsibility to report a suspicion to your Money laundering Reporting Officer, within you workplace. Suppose the sister of responsibility is liability.

Kerry, you would only need to register if you went down the self employed route, as all persons, or firms supplying accountancy services (that includes bookkeeping) must register with HMRC (or an authorised supervisory body). The fines are quite punitive.

Strictly speaking anyone that does bookkeeping, even for free, like a club treasurer, or a spouse, should register but I believe there is no charge from HMRC in those circumstances.

Bill

__________________

 

 



Expert

Status: Offline
Posts: 1569
Date:

Wella wrote:

Strictly speaking anyone that does bookkeeping, even for free, like a club treasurer, or a spouse, should register but I believe there is no charge from HMRC in those circumstances.


My understanding (regarding voluntary treasurers) after reading this

is that if you are a bookkeeper and do the work voluntarily then you need to register. If you are Joe Bloggs that has had no training in bookkeeping etc then you don't.

 



__________________

Never buy black socks from a normal shop. They shaft you every time.

http://www.smbps.co.uk/



Member

Status: Offline
Posts: 15
Date:

Thank you everyone.

Well, to be honest I would consider myself 'Joe Bloggs' I have limited book keeping knowledge, use a simple software package to keep things in order and then
intend to pass it on to an accountant. So maybe I could escape MLR, if I argued payments I received on a self employed basis were for other administratvie duties,
for which there are lots. The MLR route seems excessive in my case, but maybe I am wrong.



__________________


Expert

Status: Offline
Posts: 2198
Date:

Hi Peasie

What I think they are saying there is that if you are a professional bookkeeper, you need to carry out all the due diligence and risk assessment checks on your client, even if you are not charging a fee. If on the other hand you make you living in something that is not connected to bookkeeping but act as a volunteer treasurer, it is not necessary to carry out the checks. Could be wrong (often am) but thats the way I read that article

K, if you are carrying out bookkeeping on a professional basis (ie you are charging someone on a self employed basis) then you do need to register.

Just an extract from the HMRC website but it is the last paragraph that sums it up.


When you need to register as an Accountancy Service Provider

Types of business that are typically covered by the Money Laundering Regulations include:

  • accountants
  • auditors (including stock auditors)
  • tax advisers and tax consultants
  • bookkeepers
  • payroll agents if they provide accountancy services and/or tax advice - for example, if they calculate the tax liability, earnings or payments that are made to a business's employees or subcontractors
  • Customs practitioners, freight forwarders and similar businesses if they provide accountancy and/or tax services
  • interim (or temporary) managers who carry out any of the activities of the businesses listed above

Note that the regulations apply even to very small businesses, or where a business only does one part of a transaction. So you'd still need to register with HMRC if you were a bookkeeper with just one client, for example, or if you only kept a client's business records from which their accountant prepared the accounts.


I does appear that you have carry out the work "by way of business" to fall into registration process. If you are an employee, or not actively trying to gain income from bookkeeping then you don't need to register.

Bill



__________________

 

 

gbm


Guru

Status: Offline
Posts: 896
Date:

Kerry, as Peasie mentioned, becoming an employee would be the simplest option and wouldn't involve MLR.

Re the partnership comment, it happens a lot for couples in your circumstances, but the level of business is a factor (i.e. incoprporation may be an option). Would suggest you speak to your accountant about it.

__________________

 

Regards,
Nick

Website: www.gbmaccounts.co.uk
Twitter

Factsheet | Starting a Business

 

Page 1 of 1  sorted by
 
Quick Reply

Please log in to post quick replies.

Tweet this page Post to Digg Post to Del.icio.us
Members Login
Username 
 
Password 
    Remember Me  

BKN Special Offers

 

Resources

Careers & Qualifications  Start Up Essentials  Marketing Centre   Software Reviews
What is a book-keeper  Register as Self-Employed Networking  Software Blog
 Home Study Courses  Money Laundering Local Accountants  
 Qualifications/ Associations  Data Protection Direct Marketing  
 Franchises  Registering as an agent  Telemarketing  
 College / Night School  PI Insurance  Directories  
 Recruitment  Stationery  Google  
     Twitter  
     Volunteer Work  

 

 

 

 

 
 

 
   

 

Copy Right Bookcert Limited