My Wife As Business Owner

[MicMac 0]

Hi all.... :djuhi:

 

At point where I need to register MicMac as a buisness, however I was wondering if it was OK to register it in my wifes name, and I DJ on a voulentary basis

 

She is currently not working at all, so has no income, thus still has her full tax exemption.

 

The quest continues... :hphone:

[YourBigEvent 0]

Ask your account

[DJ Marky Marc 0]

and I DJ on a voulentary basis

 

so this is your way of not paying tax on what you earn....

 

 

She is currently not working at all, so has no income, thus still has her full tax exemption.

 

so she then becomes a company director and has a job, submits accounts and does tax self assesment etc...

 

 

[shakermaker 0]

Register YOURSELF as the business and do it all properly.

[YourBigEvent 0]

Check your PM

[MicMac 0]

I am not trying to avoid anything, just trying to spead the familys tax burden....

[DJ Marky Marc 0]

I am not trying to avoid anything, just trying to spead the familys tax burden....

 

contradiction in terms there !!!!

[MicMac 0]

I'm not sure it is. I am working full time, minimum wage, thus I enter into Income tax bracket. My wife does not work, therfore is not able to take advantage of her own tax code.

 

The question was not a way of scamming, but just wondered if it was an idea

[McCardle 1]

so this is your way of not paying tax on what you earn....

 

Providing his wife pays the tax on the income then does it matter who pays the Inland Revenue?. If Micmac wants to go out and work for nothing whilst his wife invoices the client and takes the money and puts it into a business account under her name then as long as she declares the income to the revenue I wouldn't have thought it mattered.

 

Many husband and wives form business partnerships on the basis that the tax incentives and thresholds can be adjusted to suit and so they get a little relief, remember that there is a big difference between tax avoidance and tax evasion and the smart money always chooses tax avoidance which is perfectly legal and just allows people to excercise the law and its allowances in their favour. Basically a good accountant can tell you what is and isnt legal and inform you of the ways in which you can legally reduce your tax bill and his fee will usually be a lot less than your pound of flesh to the taxman.

[digitaldistortion 0]

so this is your way of not paying tax on what you earn....

 

Providing his wife pays the tax on the income then does it matter who pays the Inland Revenue?. If Micmac wants to go out and work for nothing whilst his wife invoices the client and takes the money and puts it into a business account under her name then as long as she declares the income to the revenue I wouldn't have thought it mattered.

 

Many husband and wives form business partnerships on the basis that the tax incentives and thresholds can be adjusted to suit and so they get a little relief, remember that there is a big difference between tax avoidance and tax evasion and the smart money always chooses tax avoidance which is perfectly legal and just allows people to excercise the law and its allowances in their favour. Basically a good accountant can tell you what is and isnt legal and inform you of the ways in which you can legally reduce your tax bill and his fee will usually be a lot less than your pound of flesh to the taxman.

 

Exactly!!!

 

 

 

And...if you read any of the SME literature, this kind of suggestion will always be made. Perfectly acceptable.

 

Go for it!

 

I will be 'employing' my wife as secretary at her tax free limit eventually....and 100% legal!

 

[RichardP 0]

You should take advice from your accountant, however I believe the general principle is something like this:

 

If your wife is seen to be legitimately contributing, such as in an administrative capacity e.g. book-keeping, conducting phonecalls with clients, office management, etc (as Marky suggests) then she will be entitled to a share of the proceeds from the business.

 

The Revenue's position on this will vary, but in the past they have directly advised that family business startups share their liabilities with their contributing spouse in order to become more tax efficient.

 

The term 'Avoid' here is not illegal as long as it isn't abusive, but this is a grey area. Certainly not to be confused with the term 'Evade', where evasion is a prosecutable offence. (The Revenue would sometimes like to be blurring the distinction between the two terms to their own ends - however, avoidance in itself is no bad thing.)

 

If you want to do this sort of thing then you should ensure that you are seen to be in business in your own right, think and operate like a business, do things properly with sensible justification.

 

(Just my two cents worth having been an IT Contractor for the past 9 years.)

[madasafrog 0]

It also depends in what format you are registering the business. Are you sol trader or are you registering it as a limited company?

 

If you register it as a ltd company then you can pay both yourselves in dividends. I would not put it all in your wifes name as you will reach and breach your tax threshold anyway. Put it down as 2 shares, one for you and one for the wife. Dont forget all the things that you can claim for:

 

Mileage: 40p per mile tax free to you and the business gets tax relief on it.

 

Introduction of capital: Put the equipment into the business name. That willl be introduction of capital (eg £2000 equipment, £2000 music). Total of £4000 you can draw from the business without any tax liable. Plus having the equipment inthe business name, means it can claim tax relief on the depreciation of it.

 

All your expenses while out working: Subsitance- drinks/food etc. Keep the receipts.

 

All the ongoing costs such as new equipment/insurance/PAT testing etc will mean you can claim tax relief on these.

 

There will be other costs you will get though. Employers Liability Insurance and Public Liability Insurance. These are legal requirements but dont be put off as they are not that expensive.

 

The benefit of going legit and Ltd is that you will gain credibility and you can then try bigger venues such as hotels where they will want invoices and PAT certs/PLI etc. This will then gain you a higher fee. Dont worry about the VAT element as at this stage your turnover will mean that you dont have to register for VAT.

 

The best advice i can give is to get an account. They will have to be chartered to deal with a ltd co. Keep a log of all your outgoings and income from the business and have a seperate bank account (business account). Send the details to your accountant on a regular basis so you can keep an eye on your tax liabilities. You dont want to have a big tax bill at the end of the year and find you have not been putting anything aside for it.

 

The best thing is to do it ASAP. If you get caught, the IR will pluck a figure out of the air and you have to pay it. It wont be like paying off a credit card if you cant afford to pay. They will nail you the wall if you cant pay.

 

Well done on everything you have done so far. Love reading the threads and seeing how you are doing. A genuine reality show on DJ startup.

 

 

 

 

You should take advice from your accountant, however I believe the general principle is something like this:

 

If your wife is seen to be legitimately contributing, such as in an administrative capacity e.g. book-keeping, conducting phonecalls with clients, office management, etc (as Marky suggests) then she will be entitled to a share of the proceeds from the business.

 

 

If the business is LTD and she is a shareholder, she can sit on her ar$e and contribute nothing and still be paid by dividends. If by the PAYE route, she would then have to have "duties" and contribute to the business. Her tax would then be paid once the accountant had done her self assesment at the end of year.

 

MICMAC. What you need to do is a business plan for the next 12 months. Just very simple to display the projected income you would gain from your bookings and then a list of your costs. Take these to the accountant and he will tell you the best way to go whether it be sole trader or LTD co status.

 

 

 

Edited December 14, 2006 by madasafrog

[RichardP 0]

If the business is LTD and she is a shareholder, she can sit on her ar$e and contribute nothing and still be paid by dividends. If by the PAYE route, she would then have to have "duties" and contribute to the business. Her tax would then be paid once the accountant had done her self assesment at the end of year.

 

Yes, but don't you have to be careful about this following the recent controversial S660a case against Arctic Systems?

[madasafrog 0]

 

 

Yes, but don't you have to be careful about this following the recent controversial S660a case against Arctic Systems?

 

Result on that case fell in favour of Arctic Systems:

Report here

 

The IR are appealing it and it is going to the House of Lords in June next year. No doubt future legislation will close this down further especially when GB gets into no10. For the moment, just follow the advice of your accountant.

 

 

[HalfPint 0]

Inland Revenue are quite clear on this.

 

If the business is owned or if she is a partner in the business and she does not do any work then you are avoiding tax. New rules have come in to stop tax avoidance. As always it would be good advice to not take advice on tax from a forum but to get an accountant. but here is some friendly comments:

 

In order to make the business the wifes she would have to do the work. I guess it will be very easy to prove she never DJ's and thus you will get into trouble if you every had an investigation.

 

---

 

My advice is:

 

make it a partnership and she can do all the paperwork / admin / bookings / website design etc and take 50% of the income.

 

 

Make sure you document what she is doing !!

 

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GET AN ACCOUNTANT!

 

if you are in the woking / surrey area, my brother could help as he has a very good understanding of what you are trying to do. PM me if you are interested.

 

 

 

 

[Steve_Mitchell 0]

Tax dosn`t have to be taxing. The tax office is there to help you..They are human like us...Have a free word with them before you pay for an accountant.

[RichardP 0]

If the business is owned or if she is a partner in the business and she does not do any work then you are avoiding tax ... As always it would be good advice to not take advice on tax from a forum but to get an accountant.

 

My advice is:

make it a partnership and she can do all the paperwork / admin / bookings / website design etc and take 50% of the income.

 

Sorry but am I the only one that finds this doubly contradictory?

[digitaldistortion 0]

If the business is owned or if she is a partner in the business and she does not do any work then you are avoiding tax ... As always it would be good advice to not take advice on tax from a forum but to get an accountant.

 

My advice is:

make it a partnership and she can do all the paperwork / admin / bookings / website design etc and take 50% of the income.

 

Sorry but am I the only one that finds this doubly contradictory?

 

 

No

 

And whether MicMacs wife ACTUALLY does anything or not, or whether the business is owned/run by her (in fact or not), it's all immaterial. Arranging your tax burden to best suit you is not an avoidance.....its simply efficient business practise. Any accountant who tells you otherwise isn't worth the money they'll want you to pay for submission.

 

Get advice from the IR/an accountant. It won't cost anything, and it will be 100% unbiased.

 

[HalfPint 0]

Why the slagging off ? I thought I was being helpful ?

 

 

Let me re-state the POSTING.....

 

My post stated- GET AN ACCOUNTANT.

 

anyway it appears I now have to prove the information I offered:

 

Here are some entries I have found on the web re tax on Husband / Wife teams

 

---------

Beginining of web copy.

 

Do not commit the husband to arrangements such as working for the company for less than a market salary.....

 

The settlements legislation relates to income being diverted away from a higher rate taxpayer to a lower rate taxpayer. It only applies if an arrangement exists which is either bounteous, not commercial or not at arm’s length, or, in the case of a gift between spouses, wholly or substantially a right to income.

 

Perhaps the Budget will include guidance to strengthen the Revenue’s case, or perhaps we will have to wait until the appeal decision. But regardless, small family owned businesses need to proceed with caution.

 

end of web copy.

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My post was very clear.... The WIFE HAS TO DO SOME WORK AND YOU NEED TO RECORD WHAT SEE DOES. I thought it was quite clear, don't act on tax advice from a forum member, get a professional.

 

But to be helpful, I also added some information, which I know to be true and factual.

 

---------

 

 

 

[digitaldistortion 0]

Why the slagging off ? I thought I was being helpful ?

 

 

Let me re-state the POSTING.....

 

My post stated- GET AN ACCOUNTANT.

 

anyway it appears I now have to prove the information I offered:

 

Here are some entries I have found on the web re tax on Husband / Wife teams

 

---------

Beginining of web copy.

 

Do not commit the husband to arrangements such as working for the company for less than a market salary.....

 

The settlements legislation relates to income being diverted away from a higher rate taxpayer to a lower rate taxpayer. It only applies if an arrangement exists which is either bounteous, not commercial or not at arm’s length, or, in the case of a gift between spouses, wholly or substantially a right to income.

 

Perhaps the Budget will include guidance to strengthen the Revenue’s case, or perhaps we will have to wait until the appeal decision. But regardless, small family owned businesses need to proceed with caution.

 

end of web copy.

--------

 

My post was very clear.... The WIFE HAS TO DO SOME WORK AND YOU NEED TO RECORD WHAT SEE DOES. I thought it was quite clear, don't act on tax advice from a forum member, get a professional.

 

But to be helpful, I also added some information, which I know to be true and factual.

 

---------

 

You need to reread your post I think....

 

Oh, and just because we're jocks...doesn't mean that some of us oldies aren't or haven't been accountants etc at one time or another.... myself included.

 

So my tax advice (in general terms), is as good as any other. Even if I didn't have the benefit of direct experience....I am registered as a sole trader, and therefore (as I suspect many others on the forum are) am bang up to date with the tax laws, not wishing to give the IR one penny more than I can.

 

Christ knows they've had plenty off me in the past...now its payback time!

 

[HalfPint 0]

Clearly the two of us disagree on what is allowable. so.....

 

I have just spoken with the revenue....

 

If Self Employeed:

------

If wife owns business then she would have to employ husband to do the DJ at a commercial rate. If husband only worked for wife then he might have to be an employee and not be self employeed.

 

Both then would have to fill in self employeed tax returns or maybe Husband is paid as an employee under PAYE.

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If wife and husband are partners and both working in business then profits can be divided. Wife need to be able to show she is doing something and not just the owner and that profit is being divided to avoid paying tax on the partner that is working.

------

 

also spoke with my Brother who is an accountant.

 

There are loads of new rules on this and splitting profits to avoid tax is being looked at very carefully by the revenue. Especially Start up businesses.

 

 

 

 

 

[Kingy 0]

Clearly the two of us disagree on what is allowable. so.....

 

I have just spoken with the revenue....

 

If Self Employeed:

------

If wife owns business then she would have to employ husband to do the DJ at a commercial rate. If husband only worked for wife then he might have to be an employee and not be self employeed.

 

Both then would have to fill in self employeed tax returns or maybe Husband is paid as an employee under PAYE.

------

If wife and husband are partners and both working in business then profits can be divided. Wife need to be able to show she is doing something and not just the owner and that profit is being divided to avoid paying tax on the partner that is working.

------

 

also spoke with my Brother who is an accountant.

 

There are loads of new rules on this and splitting profits to avoid tax is being looked at very carefully by the revenue. Especially Start up businesses.

 

 

 

Makes sense to me!

 

[digitaldistortion 0]

YOU are missing the point.

 

As long as the correct paperwork regarding incomes/payments is upheld, then the facts surrounding ownership/using spouses etc. are actually immaterial. Unless you shove some half arsed solution in an inspectors face, then he is not going to pursue the matter further.

[HalfPint 0]

YOU are missing the point.

 

As long as the correct paperwork regarding incomes/payments is upheld, then the facts surrounding ownership/using spouses etc. are actually immaterial. Unless you shove some half arsed solution in an inspectors face, then he is not going to pursue the matter further.

 

 

and......... a half ar$e solution is to put the ownership of business in the wifes name, wife takes all the profit and the husband does all the work! It won't work in a million years!

 

It is so easy to check up. tax return comes in, the inspector from their desk takes one look at the Disco's website or a quick phone call enquiring about a booking and within 30 seconds they will have the proof.

 

It just is not worth the risk.

 

For all we know, the Inland revenue might be doing a "google search" at this very moment and reading this posting.

 

 

 

 

 

 

 

 

[madasafrog 0]

Born free, taxed to death