Could I make my children partners in my business?

[rich11]

Currently my wife and I run our own small business.Obviously the recession has hit us quite hard and our profits are well down on a couple of years ago

I was just wondering if I could make my two children (8 and 6) partners in our company to try to get our tax liability down

I was woking out if profits are to be say £50k for the last year(unlikely but still...) the profit divided by 4 using 4 personal tax allowances would take the liability down somewhat

Any advice would be appreciated

 

[DFL]

Any income to the children would be taxed as if it were received by you and your wife.

ITTOIA 2005 states:
(1) Income which arises under a settlement is treated for income tax purposes as the income of the settlor and for the settlor alone for a tax year if, in that year and during the life of the settlor, it –
(a) is paid to, or for the benefit of, [a relevant] child of the settlor, or
(b) would otherwise be treated (apart from this section) as income of [a relevant] child of the settlor.


Nice try

 

[accountancyextra]

Have you discussed all the tax saving options with your accountant?

If not, make sure you do BEFORE your year end

 

[gemd89]

Children can earn around £6000 before tax same as an adult, my daughter does,she is a baby model!

Gemma

 

[accountancyextra]

Children can earn around £6000 before tax same as an adult, my daughter does,she is a baby model!

Gemma

That's fine, she's doing the work!

I think the OP is suggesting shifting what is essentially his income to his kids, when the kids don't do any work in the business

 

[AccountancyStudent]

make them models in the business!! (NB: I don't think the taxman would like this)

 

[gemd89]

Depends what the business is?

My business is clothing and fancy dress and i can use my kids, pay them what normal model rates are and thats fine. As well as my daughter modelling for other things

Gemma

 

[DFL]

Gemma, the OP was asking about making his children Partners in the business which is a clear no-no. There is clear distinction between your situation and his.

 

[gemd89]

I understand, was just trying to offer a solution.

Theres always someone trying to defraud the tax system isnt there, just pay it like everyone else!

Gemma

 

[accountancyextra]

Theres always someone trying to defraud the tax system isnt there, just pay it like everyone else!

Gemma

There are plenty of other legitimate tax reduction opportunities that are probably available to the OP. He just needs to sit down with his accountant and do some proper planning

 

[wizzard]

I understand, was just trying to offer a solution.

Theres always someone trying to defraud the tax system isnt there, just pay it like everyone else!

Gemma

Big difference between tax evasion (illegal) and tax avoidance (legal).