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Employing the Mrs

AMS_AccountantsAMS_Accountants Hull, East YorkshireRegistered Posts: 31
Hi

Whats the general consensus these days about sole director companies hiring spouses as either directors / employees and utilising their tax allowance?

Had a potential client ask me if he could hire his wife and pay her up to the tax allowance even though she will not be doing any work for the business.

My response was "No" due to the fact that it seemed like tax evasion but I am sure that there are plenty of people out there that get paid for doing nothing and if she has a tax allowance to use, why not use it?

What are other people's thoughts?

Thanks
Carl Derving FMAAT | Managing Director
AMS Accountants
www.ams4u.co.uk | 01482 257752

Comments

  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    It's very common - I advise clients they must complete normal employee procedures (ie. new starter forms, job description and contract etc.) and they should actually have a job within the business (PA, secretary, admin and the like) and be paid at the commercial rate. Many are paid c. £10 per hour for 20 hours per week work funnily enough.
  • AMS_AccountantsAMS_Accountants Hull, East YorkshireRegistered Posts: 31
    Being a director though, you don't have to do all that so can they be employed as directors?
    Carl Derving FMAAT | Managing Director
    AMS Accountants
    www.ams4u.co.uk | 01482 257752
  • burgburg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,441
    It needs to be a business decision not a tax motivated one.
    Regards,

    Burg
    MarieNoelle
  • AMS_AccountantsAMS_Accountants Hull, East YorkshireRegistered Posts: 31
    I have seen agencies advise their workers to hire their wives as bookkeepers to use her personal allowance and her dividend allowance. That's a pretty expense bookkeeper for 30 minutes work a week.
    Carl Derving FMAAT | Managing Director
    AMS Accountants
    www.ams4u.co.uk | 01482 257752
  • TreadStoneTreadStone Feels At Home AAT Licensed Accountant Posts: 280
    Let's face it, we all know what the "correct" treatment is but how many times do we see wife's wages going through ? Fairly common I would say. It shouldn't be tax motivated but it often is.

    Not saying I condone it of course :)
  • AMS_AccountantsAMS_Accountants Hull, East YorkshireRegistered Posts: 31
    The situation I am coming across is that the wife becomes the director & shareholder and takes £16k out of the business (salary and dividends) and the husband (the worker) does the same thing.

    Had a recruitment agency (that do contractor accounting in house) tell me that the wife doing bookkeeping (30 minutes a week) was enough to pass an HMRC investigation. I somehow doubt this is correct.
    Carl Derving FMAAT | Managing Director
    AMS Accountants
    www.ams4u.co.uk | 01482 257752
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