Paying partner wages

beavis182
beavis182 Registered Posts: 130 Dedicated contributor 🦉
in General accounting discussion
Not sure if anyone can help but basically...

I have a friend who is self employed with 3 children. He is VAT registered. His wife doesnt work and he wants to know the deal with paying her money/wages. What he can claim back etc..

Comments

  • whiterose
    whiterose Registered Posts: 49 Regular contributor ⭐
    The wife would have to genuinely do some work for the business for him to be able to pay her any kind of wage. What kind of profit does your client make? May be worth considering incorporating the business. Then a very common scenario is for him to pay himself a so-called 'personal allowance salary' and take the rest of the profit out of the company as a dividend. His wife could be a shareholder and also receive a dividend.
    There are constant rumours that the govt. will introduce legislation to stop this (cf Arctic Systems) but nothing yet.
  • sloshed
    sloshed Registered Posts: 100 Dedicated contributor 🦉
    Hi Beavis

    I feel I should mention that I am not a member in practise. My current status is that I have full membership (MAAT) and currently studying ATT. So my advise is based on my current knowledge and it would be wise to seek other advise from other members.

    As mentioned by whiterose. In order for your friend to be able to claim the wages as a deduction in his accounts. He will need to demonstrate that the wages have been paid within 9 months of the end of his financial year (normally, paying the wage into a joint bank account is sufficient) and the wage is not above that would normally be paid to a third party for carrying out the work.

    Your friend would also need to consider whether there are any implications with regard to being an employer.

    1. Is the wage above the Lower Earnings Limit for NIC. Do they need to register as an employer with HMRC.
    2. If the wage is not above the Lower Earnings Limit. Would it be advisable to be so?

    Hope this helps

    Regards

    Brian
  • Marga
    Marga Registered Posts: 981 Epic contributor 🐘
    hi


    i do have done some "unofficial bookkeping" for my husband's business, ie , setting up invoices, chase for payment, registering payments, creating an income/outgoigng report etc so he declares that he pays me on the form of transfering money from the bussiness to a personal account which he writes down as wages of "office administrator".

    Also he allows some profit for him as his salary for doing the work as he doesnt take any salaries this is more like drawings for personal use

    He is a sole trader gardener but not registered for VAT




    hope that helped

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