Tax compliance question

[Bob123456789]

I’m a PAYE employee earning ~£55k a year (so in the higher-rate band).
My partner has an eBay account (set up in her name over 10 years ago), and about 2 years ago we started selling parts more seriously. It’s now turning over around £35k/year.
The eBay account, bank account, and tax return are all in her name. She pays the tax.
However, I do most of the physical work — sourcing, listing, packing, pricing — though she still helps and is fully aware of how everything works.
She decides what money to draw down, and she transfers some to me for household use (not a fixed wage).
My worry is that because I do 80–90% of the work, it could look like I set the business up in her name just to avoid 40% tax and losing our child benefit.
That wasn’t the intention — it just grew organically from her account, and we never changed it over.
All income has been declared, and tax paid in full under her self-assessment.
Am I at risk of being seen as the “real” operator, and that HMRC could reassign the income back to me?
Is this something I should formalise differently now, and what would the safest structure be?

 

[Newchodge]

I’m a PAYE employee earning ~£55k a year (so in the higher-rate band).
My partner has an eBay account (set up in her name over 10 years ago), and about 2 years ago we started selling parts more seriously. It’s now turning over around £35k/year.
The eBay account, bank account, and tax return are all in her name. She pays the tax.
However, I do most of the physical work — sourcing, listing, packing, pricing — though she still helps and is fully aware of how everything works.
She decides what money to draw down, and she transfers some to me for household use (not a fixed wage).
My worry is that because I do 80–90% of the work, it could look like I set the business up in her name just to avoid 40% tax and losing our child benefit.
That wasn’t the intention — it just grew organically from her account, and we never changed it over.
All income has been declared, and tax paid in full under her self-assessment.
Am I at risk of being seen as the “real” operator, and that HMRC could reassign the income back to me?
Is this something I should formalise differently now, and what would the safest structure be?

Unless they read this forum and can decipher your name, how would they know?

 

[Bob123456789]

Unless they read this forum and can decipher your name, how would they know?

Thanks for your input. I get that I have thought that my self but I don’t like living in fear of thinking I am not doing things correctly. I have started helping more basically unpaid as the sales have increase more than we expected i don’t take a wage and no wages are offset as expenses. I would prefer to be tax efficient but within the rules of HMRC I don’t know enough about what you can and can’t do

 

[Newchodge]

Thanks for your input. I get that I have thought that my self but I don’t like living in fear of thinking I am not doing things correctly. I have started helping more basically unpaid as the sales have increase more than we expected i don’t take a wage and no wages are offset as expenses. I would prefer to be tax efficient but within the rules of HMRC I don’t know enough about what you can and can’t do

OK.

It is your wife's business. She is not employing you or claiming tax relief for the wages she doesn't pay you. You offer her help. It may be that you prefer to help with her business than do your share of household work. HMRC is not going to care.

 

[WaveJumper]

Don't over think it

 

[Bob123456789]

OK.

It is your wife's business. She is not employing you or claiming tax relief for the wages she doesn't pay you. You offer her help. It may be that you prefer to help with her business than do your share of household work. HMRC is not going to care.

Thank you

Don't over think it

thank you I am a massive over thinker

 

[MyAccountantOnline]

I’m a PAYE employee earning ~£55k a year (so in the higher-rate band).
My partner has an eBay account (set up in her name over 10 years ago), and about 2 years ago we started selling parts more seriously. It’s now turning over around £35k/year.
The eBay account, bank account, and tax return are all in her name. She pays the tax.
However, I do most of the physical work — sourcing, listing, packing, pricing — though she still helps and is fully aware of how everything works.
She decides what money to draw down, and she transfers some to me for household use (not a fixed wage).
My worry is that because I do 80–90% of the work, it could look like I set the business up in her name just to avoid 40% tax and losing our child benefit.
That wasn’t the intention — it just grew organically from her account, and we never changed it over.
All income has been declared, and tax paid in full under her self-assessment.
Am I at risk of being seen as the “real” operator, and that HMRC could reassign the income back to me?
Is this something I should formalise differently now, and what would the safest structure be?

It's not an unusual scenario many partnerships and businesses develop in this way. I think from what you've said you'd be hard pressed to contest you dont have a partnership now.

You are clearly (and I think rightly) concerned you should deal with this properly - an accountant will be able to advise you further.

 

[Paul Kelly ICHYB]

I’m a PAYE employee earning ~£55k a year (so in the higher-rate band).

You will be happy to learn that you are not in the top band...!

As mentioned, dont overthink.

Everything is in your wife's name and she takes the profits. As long as she declares the profits in a tax return (as self employed) there is no reason why you would be chased!

 

[MyAccountantOnline]

You will be happy to learn that you are not in the top band...!

As mentioned, dont overthink.

Everything is in your wife's name and she takes the profits. As long as she declares the profits in a tax return (as self employed) there is no reason why you would be chased!

I disagree the OP has valid concerns and bear in mind HMRC do undertake random Enquiries.

Leaving everything in the wifes name to save tax is not good tax advice.

 

[Paul Kelly ICHYB]

The business is in her name and she withdraws money. Assuming she declares the revenue, she will pay tax.

Maybe @Bob123456789 should declare the money he pays her (she can then reduce her profits more), but HMRC will see a declaration and tax being paid.

If the OP is doing this to specifically avoid tax, that's a different thing, but that isn't how I read the OP.

My worry is that because I do 80–90% of the work

Re this, he accepts the payment his wife gives him (e.g. £10k), keeping under £60k (is that the threshold? It wouldn't be the first time a wife exploits a husband!!!

 

[MyAccountantOnline]

I dont believe for one moment this has been done to evade tax.

As the OP says it's just developed and this often happens, but it is time to deal with it properly now. Continuing to treat it as his wifes business and having her declare the income isn't doing it properly. It puts them at risk of back-dated tax and penalties.

The OP and his wife have several options and structuring it correctly will minimise tax.

 

[Ziggy2024]

Agree with Nicola here. HMRC could look to argue that the business is your wife's in name only and look to assess the profits on you (or at least a proportion of the profits).

Well worth an appointment with an accountant to discuss options.

 

[BlueDress1]

How many husbands with limited companies employ their wives pretty much on paper for the purpose of reducing corporation tax - I bet it’s a fair old whack - OP she might be better doing it via a limited company and paying you an actual salary etc or even dividends you are already into a higher tax bracket on PAYE Jobband paying NI - I can’t see it matters a jot then who is doing most of the work if tax is being paid .

 

[JEREMY HAWKE]

Yes your not officially or legally an employee or have any other capacity in this firm.
There is nothing to worry about

Remember that what you do in your spare time is your business but I can assure you that most of it won't be no where near as embarrassing as what the members of this forum get up to in their spare time

 

[Bobbo]

She decides what money to draw down,

What is the relevance of this comment? I assume you are aware that in a self-employed situation like here the business owner is taxed on the profits as they arise irrespective of how much they take out of the business.

 

[Bob123456789]

What is the relevance of this comment? I assume you are aware that in a self-employed situation like here the business owner is taxed on the profits as they arise irrespective of how much they take out of the business.

I am making reference to the fact she is in full control over the finances of the business she can draw out of the business account what she pleases and I have no control over that. All income is declared

 

[Bob123456789]

It's not an unusual scenario many partnerships and businesses develop in this way. I think from what you've said you'd be hard pressed to contest you dont have a partnership now.

You are clearly (and I think rightly) concerned you should deal with this properly - an accountant will be able to advise you further.

Thank you for you input. I think you’re right with speaking to a local accountant I just to make sure everything is correct. I haven’t got a problem with moving the business into my name I just do not want to overpay tax if I never needed to. I enjoy helping out and being involved but like I say I am not paid by the business personally but the household does benefit from the extra money naturally.

 

[Bob123456789]

How many husbands with limited companies employ their wives pretty much on paper for the purpose of reducing corporation tax - I bet it’s a fair old whack - OP she might be better doing it via a limited company and paying you an actual salary etc or even dividends you are already into a higher tax bracket on PAYE Jobband paying NI - I can’t see it matters a jot then who is doing most of the work if tax is being paid .

Thank you for your help I will look into it.

 

[Bob123456789]

The business is in her name and she withdraws money. Assuming she declares the revenue, she will pay tax.

Maybe @Bob123456789 should declare the money he pays her (she can then reduce her profits more), but HMRC will see a declaration and tax being paid.

If the OP is doing this to specifically avoid tax, that's a different thing, but that isn't how I read the OP.


Re this, he accepts the payment his wife gives him (e.g. £10k), keeping under £60k (is that the threshold? It wouldn't be the first time a wife exploits a husband!!!

I don’t take a wage from the business, I just help and over time my help has increased. She still controls the finances

 

[Paul Kelly ICHYB]

I don’t take a wage from the business

she transfers some to me for household use

That could be considered a wage or payment!

Just pay everything to her and she pays the household bills. Or get a joint account.

You say:

It’s now turning over around £35k/year

But what is the profit - what does she (or both) take out? The profit is what she will be taxed on.

 

[DontAsk]

That could be considered a wage or payment!

It's a simple transfer between spouses, but...

But what is the profit - what does she (or both) take out? The profit is what she will be taxed on.

...she cannot claim what she pays you results in a reduction in profit.

 

[Paul Kelly ICHYB]

...she cannot claim what she pays you results in a reduction in profit.

If it is pay (i.e. he is an employee, which he isn't), she can.

She is taxed on the total profit of the business in the trading/tax year.

 

[Ziggy2024]

And this is why you shouldn't take advice from a general forum.

The people saying don't worry are not really understanding the situation.

The reality of your post is that your wife is not a sole trader, you are in a partnership which has not been correctly reported.

I agree that this seems to be an innocent mistake. If it were to be deemed a deliberate act that would bring it into tax evasion (not avoidance). You are correct that you need to correct the position going forward.

If it is pay (i.e. he is an employee, which he isn't), she can.

Not without setting up and reporting through a PAYE scheme which would attract 40% tax due to the OP's other earnings.

 

[Paul Kelly ICHYB]

The reality of your post is that your wife is not a sole trader, you are in a partnership

If she takes all the money, it is not a partner ship.

As, I think, someone else mentioned, it is not uncommon for partners & family to help out in small/home businesses.

Not without setting up and reporting through a PAYE scheme which would attract 40% tax due to the OP's other earnings.

Correct, which could still keep him/them under the threshold.

As mentioned many times, the OP should speak to an accountant, but as hey are both paying taxes (I assume the wife does under SE), I cannot see them as a target for HMRC.

 

[Ziggy2024]

If she takes all the money, it is not a partner ship.

A partnership is a legal entity regardless of who is taking the money. A partnership is a matter of fact and based on what has been said this is a partnership.

As, I think, someone else mentioned, it is not uncommon for partners & family to help out in small/home businesses.

It's not helping out though, as the OP seems to realise.

Correct, which could still keep him/them under the threshold.

OP is already in the higher rate so all income taken would be at higher rate when his wife would presumably be in basic rate. If they are looking to minimise tax this would not be a good idea

As mentioned many times, the OP should speak to an accountant, but as hey are both paying taxes (I assume the wife does under SE), I cannot see them as a target for HMRC.

As noted above I have explained why HMRC could look to attack the structure. Diverting income to avoid higher rate tax.

 

[Paul Kelly ICHYB]

A partnership is a legal entity

Correct, however, they have not mentioned that they are a partnership (have they? Sorry if I miised that)

It's not helping out though

How does HMRC know that?

OP is already in the higher rate so all income taken would be at higher rate when his wife would presumably be in basic rate. If they are looking to minimise tax this would not be a good idea

WIthout a deep dive, tax efficiency would appear to be wife taking/declaring everthing. However, if he was to also take a wage (or partnership payment) this might keep him under the £60k threshold.

As noted above I have explained why HMRC could look to attack the structure.

Why would they? It's the wifes business that she declares and pays tax on (again, assumption).


We still do not know how much we are talking about (we know the t/o not profit!).

 

[Ziggy2024]

Correct, however, they have not mentioned that they are a partnership (have they? Sorry if I miised that)

As explained it is a matter of fact. The facts mentioned by OP indicate a partnership whether they want it to be or not.

How does HMRC know that?

They don't. In the event of an investigation though this could get extremely messy hence the advice to sort it now.

WIthout a deep dive, tax efficiency would appear to be wife taking/declaring everthing. However, if he was to also take a wage (or partnership payment) this might keep him under the £60k threshold.

It would mean tax @ 40% compared to tax @ 20% so not really the best advice.

Why would they? It's the wifes business that she declares and pays tax on (again, assumption).

Already explained in my previous posts.

We still do not know how much we are talking about (we know the t/o not profit!).

Best advice has already been given by Nicola. I hope the OP has taken that advice.

 

[Paul Kelly ICHYB]

It would mean tax @ 40% compared to tax @ 20% so not really the best advice.

But it would be more 'honest'?

 

[MyAccountantOnline]

Thank you for you input. I think you’re right with speaking to a local accountant I just to make sure everything is correct. I haven’t got a problem with moving the business into my name I just do not want to overpay tax if I never needed to. I enjoy helping out and being involved but like I say I am not paid by the business personally but the household does benefit from the extra money naturally.

You are very welcome.

There is a lot of incorrect information and very unwise suggestions in this thread.

The fact that you aren't paid a 'wage' by the business isn't relevant. You are receiving drawings from the business. If you want to do a bit of research read up on the definition of and what makes a partnership.

It's not a difficult matter for an accountant who looks after small businesses to deal with for you and as I mentioned the business can be structured to minimise tax. I'd contact a few accountants and see which you feel best suited to.

 

[MyAccountantOnline]

If she takes all the money, it is not a partner ship.

...

Have a read up on what makes a partnership - it's quite possible for one partner not to take any profit or salary.

However in this case the OP is taking drawings he stated 'she transfers some to me for household use'

 

[Paul Kelly ICHYB]

Have a read up on what makes a partnership - it's quite possible for one partner not to take any profit or salary.

I understand this.

However in this case the OP is taking drawings he stated 'she transfers some to me for household use'

So, if she paid the funds into a joint family bills account, the OP wouldn't be taking money. The wife would be contributing to family bills!

 

[MyAccountantOnline]

I understand this.


So, if she paid the funds into a joint family bills account, the OP wouldn't be taking money. The wife would be contributing to family bills!

I'd love to see you try and get that one past HMRC

It's drawings - the OP has told us that already.

 

[Bob123456789]

Thank you for everyone’s advice, like I say I am here to dodge tax I just want to make sure I am doing things correctly. I will find a local accountant and hopefully they will be able to give us a better structure to remain tax efficient and compliant. It’s very complicated all this tax stuff

 

[Bob123456789]

I'd love to see you try and get that one past HMRC

It's drawings - the OP has told us that already.

She pays her PAYE wages into that account so what is the difference with the Sole trader wages out of interest?

 

[MyAccountantOnline]

She pays her PAYE wages into that account so what is the difference with the Sole trader wages out of interest?

You stated She decides what money to draw down, and she transfers some to me for household use so the funds coming out of the business are clearly joint drawings.

However what monies are taken out of the business by each individual doesn't determine whether a partnership exists it actually goes back to the Partnership Act 1890 where a partnership is defined as 'the relation which subsists between persons carrying on a business in common with a view of profit' Once you look at how you are operating the business you've got a partnership.

 

[Paul Kelly ICHYB]

The OP has stated She decides what money to draw down, and she transfers some to me for household use

So if she stops doing that, takes 100% and pays into a joint pot or just pays the bills?

 

[MyAccountantOnline]

So if she stops doing that, takes 100% and pays into a joint pot or just pays the bills?

You are focusing on what monies are being taken out of the business for private use - you need to look at what defines a partnership instead.

 

[Paul Kelly ICHYB]

You are focusing on what monies are being taken out of the business for private use - you need to look at what defines a partnership instead.

I am looking at real world application, not the HMRC textbook.

If HMRC were to come knocking, they would see the wife trading via her ebay account with payments being made to her back account who submits her own self assessment and pays the relevant tax. There would not be a need to bring the OP into the conversation. Even if he was, 'my husbands helps me out with the odd thing...' would probably be an acceptable answer.

Again, we still do not know what sort of money we are actually talking about!

 

[Paul Kelly ICHYB]

Thank you for everyone’s advice, like I say I am here to dodge tax

Might be worth editing that bit!

 

[MyAccountantOnline]

I am looking at real world application, not the HMRC textbook.

If HMRC were to come knocking, they would see the wife trading via her ebay account with payments being made to her back account who submits her own self assessment and pays the relevant tax. There would not be a need to bring the OP into the conversation. Even if he was, 'my husbands helps me out with the odd thing...' would probably be an acceptable answer.

Again, we still do not know what sort of money we are actually talking about!

Oh if only it were that simple - with the greatest of respect I suspect you've not dealt with many tax enquiry cases.

I dont think this is helping the OP. He clearly has very valid concerns, has no intention of evading tax and wants to do the right thing and is now going to do so.