Invoicing My Wife's Business?

[Foresty_Forest]

My wife's business will on occasion use my forthcoming van business. Have already learned that I simply invoice her for the appropriate amount. But will the IR need to see that money has actually changed hands? That I have literally received money from my wife? I'll have to record the income from the transaction in my accounts, but if no money arrives in my bank account could that be problematic? Based on my wife's last year, there would be a few hundred pounds worth of transportation. I ask because we share our finances and it seems a bit silly to move money from one account to another.

 

[Mark T Jones]

I would suggest that you either do it as a 'favour' (actually I wouldn't suggest that) or as a fully documented and completed business transaction.

This is a classic vague scenario which can easily backfire

 

[Foresty_Forest]

I would suggest that you either do it as a 'favour' (actually I wouldn't suggest that) or as a fully documented and completed business transaction.

This is a classic vague scenario which can easily backfire

Thanks for the advice. It would be a genuine business transaction and I'd make sure it was fully documented. I think I should take "completed business transaction" to mean literally receive money.

 

[MyAccountantOnline]

My wife's business will on occasion use my forthcoming van business. Have already learned that I simply invoice her for the appropriate amount. But will the IR need to see that money has actually changed hands? That I have literally received money from my wife? I'll have to record the income from the transaction in my accounts, but if no money arrives in my bank account could that be problematic? Based on my wife's last year, there would be a few hundred pounds worth of transportation. I ask because we share our finances and it seems a bit silly to move money from one account to another.

Provided you are declaring the income and paying any tax due I wouldn't think HMRC will be in the slightest interested in a few hundred pounds of transport costs.

 

[Mark T Jones]

Thanks for the advice. It would be a genuine business transaction and I'd make sure it was fully documented. I think I should take "completed business transaction" to mean literally receive money.

I'm not sure what you're trying to achieve, but to me it's a non-business business transaction.

Why not just do it properly?

 

[Gecko001]

Isn't this similar to a firm lending a van to one of its employees to move accommodation at the weekend. I have never heard of a firm sending the employee an invoice for the use of the van in such a case.

 

[Newchodge]

Isn't this similar to a firm lending a van to one of its employees to move accommodation at the weekend. I have never heard of a firm sending the employee an invoice for the use of the van in such a case.

Not really. This is a B2B transaction. The fact that the owners of the 2 businesses are related does not change that.

 

[Gecko001]

Not really. This is a B2B transaction. The fact that the owners of the 2 businesses are related does not change that.

Yes I see that. Something just does not seem right here. Perhaps there could be an insurance problem. The van is insured for use by a certain firm who the insurer knows carry out certain business activities, but if the van is lent to another firm who carries out different busniness activities the insurer might want to know in case those activities will require a higher premium.

 

[Newchodge]

Yes I see that. Something just does not seem right here. Perhaps there could be an insurance problem. The van is insured for use by a certain firm who the insurer knows carry out certain business activities, but if the van is lent to another firm who carries out different busniness activities the insurer might want to know in case those activities will require a higher premium.

The van is not being lent. The client (wife) is contracting with the supplier (husband) to provide man with a van services. There is no suggestion that the client will drive the van.

 

[Bobbo]

Yes I see that. Something just does not seem right here. Perhaps there could be an insurance problem. The van is insured for use by a certain firm who the insurer knows carry out certain business activities, but if the van is lent to another firm who carries out different busniness activities the insurer might want to know in case those activities will require a higher premium.

Insurance is a good point to raise.

If the van is stolen with £X of goods belonging to the wife's business inside, will OP's vehicle insurance policy pay out?

 

[campbeji]

Hi all,

I'm not an expert, so this might be nonsense.

As I understand it the OP's question was basically how do you complete the transaction between him and his wife's company? The way I would do it is to issue the invoice properly, and then get the wife(client) to pay in cash and mark the invoice paid, with a cash payment. There is no need to transfer money between accounts, and in fact, there is no need to actually swap the cash either as long as it appears in the accounts.

I would not recommend doing what some people might mention, that you could do the job for the client with the intention of invoicing it once completed, and maybe forgetting to generate the invoice, I mean there can be so much to remember as a small business owner. I would not recommend doing this at all, and the fact that this happened to me on more than one occasion in the early days isn't really relevant. I genuinely did forget to issue invoices on a few occasions, but of course, this was with clients who I really did want to bill but by the time I remembered it was too late. I mislaid my notebook and found it again years later, cost me £00's.

Good Luck

 

[Gecko001]

Insurance is a good point to raise.

If the van is stolen with £X of goods belonging to the wife's business inside, will OP's vehicle insurance policy pay out?

Yes for theft or anything else possibly. If the wife's business sector was the type of sector which insurers thought attracted high risk and the OP's insurance was just for the run of the mill business use which carried a lower risk to the insurers. I know a bit off topic because this is in the accounts sub-forum, but maybe worth looking into.

 

[DontAsk]

Hi all,

As I understand it the OP's question was basically how do you complete the transaction between him and his wife's company? The way I would do it is to issue the invoice properly, and then get the wife(client) to pay in cash and mark the invoice paid, with a cash payment. There is no need to transfer money between accounts, and in fact, there is no need to actually swap the cash either as long as it appears in the accounts.

Bank statements or petty cash balance will not reconcile if the cash does not change hands.

 

[WaveJumper]

I would say if you're going to do a transaction do it properly or not at all. The question I suppose, was you considering this as some tax efficient transaction?

Far be it for me to know any better than our accountants on here (greatest respect) yes HMRC might not be bothered by the "odd" £200 "transaction" but in my book best not to give them any reason to start looking for other, what shell I say "discrepancies"

 

[vivente]

Just do a normal business transaction and be done with it. HMRC pick and choose what they will bother about and how they view your business largely determines how they view you. They may chanllege you over the rounding of VAT but ignore obvious gaps in expense claims. It's just where their focus is and what they can be bothered with. I choose to do things right so far as I understand that and then I hope that I don't have to answer any awkward questions.

 

[campbeji]

Bank statements or petty cash balance will not reconcile if the cash does not change hands.

Um, yeah that's correct. I didn't really think I needed to explain the whole process. You pretend to be paid the money for the invoice, you mark the invoice as paid with cash, you then pretend to take the money out of your cash to pay your wages or whatever.

The original question was about how to avoid transferring money between bank accounts, this will do that. Although I am saying that you 'pretend' to pay etc there is nothing wrong with doing this. HMRC don't care about the physical cash, just how it is shown in the accounts for the two businesses

 

[campbeji]

Um, yeah that's correct. I didn't really think I needed to explain the whole process. You pretend to be paid the money for the invoice, you mark the invoice as paid with cash, you then pretend to take the money out of your cash to pay your wages or whatever.

The original question was about how to avoid transferring money between bank accounts, this will do that. Although I am saying that you 'pretend' to pay etc there is nothing wrong with doing this. HMRC don't care about the physical cash, just how it is shown in the accounts for the two businesses

And of course, the client company needs to take the cash out of their petty cash to pretend to pay for it.

Whether the Wifey actually gives the hubby the cash is another thing, but HMRC generally don't get into personal finances