Employee or switch to Partnership?

[Greg Findley]

Hi all,

After some accounts/business advice, my girlfriend is being made redundant in May, so we're looking at her joining me full-time with my business - which comprises freelance design work & running a few of my own websites (some are related to her profession).

We're unsure whether to switch to a partnership, or for me to remain as a sole trader, and then employ her. We live together so most of our earnings end up going on the same expenses 50/50, so the income breakdown isn't such an issue, just after any advice on the best route for simplicity of paperwork and tax savings!

I have FreeAgent for my accounts and can setup a basic PAYE setup through that, although am aware there wil be more paperwork involved with both options.

Another option would be for her to become self-employed, but was concerned if she's just working on my existing sites, could we have issues with IR35 with such a setup?

Thanks in advance for any advice anyone can offer!!
Greg

 

[gouldie0]

Hi Greg,

I think you need to work out if this is going to be something of a stop gap, by that I mean is she likely to go back into another PAYE job in future?

Setting up a partnership does involve a little more paperwork as you have to register the partnership and your girl friend will also have to register as self employed. You'll find a little more information here @ >>HMRC<<

This will also mean changing your FreeAgent software settings to a partnership aswell. If you want to discuss these changes I be happy to talk them through with you being a FreeAgent friendly accountant ?

I think the simplest route may be to register as an employer but that will involve additional paperwork also. You can find information on your responsibilities as an employer here @ >>HMRC<<

Kind Regards

Neil

 

[Greg Findley]

Hi Neil,

Thanks for the info, it will all depend how things go, hopefully it won't be a stop gap, but we know it will be a big change so aware it may not go quite as planned.

I'm already registered as self-employed and have been since 2008, am I right in thinking with a partnership that would effectively come to an end, then we would both register as self-employed as a partnership?

In terms of minimal disruption if things didn't go as planned, would me employing her through my sole trader setup be the best option? and is min. salary (under £4700) the best way of minimizing tax expense on PAYE?

Thanks,
Greg

 

[gouldie0]

Hi Neil,

I'm already registered as self-employed and have been since 2008, am I right in thinking with a partnership that would effectively come to an end, then we would both register as self-employed as a partnership?

In terms of minimal disruption if things didn't go as planned, would me employing her through my sole trader setup be the best option? and is min. salary (under £4700) the best way of minimizing tax expense on PAYE?

Thanks,
Greg

Hi Greg,

As you're already registered as self employed, it would just be a case of your girl friend registering and then you registering the partnership together. You would then use both of your self employed details when forming the partnership. You're self employment wouldn't end, it would merely be based on your split of the businesses profits based on your partnership agreement.

One thing I forgot to mention in my previous post is a partnership agreement, it may be worthwhile investing in one just in case things go pear shaped. I'm not implying anything merely offering you a little advice , you can find out more >>here<<

If you did register as an employer, it would be up to you how much you paid her but you would need to take into consideration things like the minimum wage for example. I'm not sure if you're thinking about the small salary and dividend aproach but this is only applicable to limited company directors.

Kind Regards

Neil

 

[Greg Findley]

Hi Neil,

Thanks for quick reply & info, and yes would definitely get an agreement drawn up if going into a partnership, would be silly not to I think.

The plan with employment was for a lower salary, part-time hours, as I say most of our outgoings are split in any case so it doesn't make much difference what the income split is, just that there is income

Thanks for info/assistance..
Greg