BUSINESS ADVICE

PARTNER POWER CAN SAVE TAX

A.

It is possible to pay your spouse/partner for assist-

ing in the running of your busi- ness. It is widely accepted that where a spouse/partner has lit- tle or no other income then there are tax advantages in paying them for their assistance in running the business. This has become common practice. However, for the wages to be tax deductible the spouse/partner has to actually be doing work, the wages have to be physically paid and the rate of pay commensurate to the duties performed. All such payments made must also be in addition to any contri- bution to the house keeping.

ble? And how much can I pay them? Q.

I have been told that to reduce my tax bill I can pay my spouse for assisting me. Is this possi-

2) Establish the market rate for such a job, how much would you need to pay for a third party to do these tasks for you? 3) Keep a simple diary note of the hours worked per week and

In order to justify any such payments I would suggest you do the following: 1) Create/describe a job specification ie. making appointments, doing the bookkeeping, arranging referrals etc

then make a weekly or monthly payment via cheque for the wages due in relation to the hours worked. Don’t forget though that if payments exceed either £96 per week or £419 per month you may need to operate a full payroll scheme and register this with HMRC. However this may have advantages in respect of gaining some much needed National Insurance credits. 4) Speak to your accountant prior to making any such payments to check that you are not in breach of any legislation that could result in penalties being charged. Whilst speaking to your accountant, ask about forming a partnership to help reduce your tax bill, this may be a better option than paying your spouse/partner.

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