what is the value of wife's work

[gwokka]

just read an article whereby a self employed plumber was taken to a tribunal by HMRC where they disagreed with how much he was paying her and HMRC won. A lot of small businesses pay there spouses or even family members a salary generally to the value of the ni threshold but ive never seen anything before whereby you have to justify the work done or the hourly rate. if as a business owner If want to pay someone £10 an hour or £100 an hour I don't see why I have to justify it. what about a professional footballer: Do HMRC go to man city and tell them Sergio Aguerro is only worth say 100k a week instead of 150k(not sure if figures are correct but you get my gist).

just wondered if anyone has ever come across HMRC asking for justification before

sorry cant post link but if you do a search with "what is the value of a wife's work" it comes up first article

 

[STDFR33]

Ask yourself, would you employ a complete stranger doing the same work to the same standard at £100 per hour?
If the answer is yes, you're probably grand. If not, you are probably open for the arrangement to be attacked.

For the benefit of others, the case you are referring to is McAdam v HMRC [2017] UKFTT 838.
HMRC said that a fair wage for the work done would have been £8 per hour, which the tribunal agreed with.

£8 seems rather low considering £10 was quoted for a 2004 return in this case:
John Evans v Revenue & Customs [2010] UKFTT 140 (TC) (22 March 2010).
The tribunal did note a lack of evidence presented (or not presented) by the plumber. That's why it may have been an easy one for HMRC to go for £8ph.

In short, don't take the piss with spousal wages.

 

[Mr D]

Ah yes, seems to be that HMRC think she was doing a lot less hours than he claimed for the amount of work she was reported to have done.
If claiming someone doing the admin for a business with only minor admin then make duties heavier or pay less.

 

[Talay]

Surely someone "smart" would create enough work to justify the wages paid

Not sure why a plumber should even be self employed really as they have quite a lot of supplies they could claim for and the best withdrawal route currently is the £680 a month plus £5k dividends and then additional dividends up to the 40% limit. About £80k between 2 people I think ?

 

[AppCo]

Out of interest, would the rules be any different if he was running a Ltd company rather than being Self Employed (Assuming SE here means as a sole trader)

 

[TheCyclingProgrammer]

Out of interest, would the rules be any different if he was running a Ltd company rather than being Self Employed (Assuming SE here means as a sole trader)

The same rule applies as far as whether or not a spouse salary would be an allowable expense against the company’s corporation tax bill. The salary must be wholly and exclusive for business purposes which generally means it must be remuneration for some actual work and not “excessive”.

That said there’s an argument to make that making a spouse a director of the business - which carries legal responsibilities - will usually justify a salary up to the personal tax threshold at least.

 

[Mr D]

The same rule applies as far as whether or not a spouse salary would be an allowable expense against the company’s corporation tax bill. The salary must be wholly and exclusive for business purposes which generally means it must be remuneration for some actual work and not “excessive”.

That said there’s an argument to make that making a spouse a director of the business - which carries legal responsibilities - will usually justify a salary up to the personal tax threshold at least.

Depending on the company - justifying a salary based on a few hours a month work to that level would be hard. A busy company would find it easier.

 

[TheCyclingProgrammer]

Depending on the company - justifying a salary based on a few hours a month work to that level would be hard. A busy company would find it easier.

I don’t think it really matters. The remuneration is for taking the responsibilities of a director, not how many hours that are worked.

My accountant doesn’t believe HMRC would challenge a director salary unless you’re seriously taking the piss.

I’m very comfortable with my wife being paid £6k/year for being company director and some admin but I don’t think double that is overly excessive either.

I’m not saying you don’t have to think about this. The general principle applies as I stated above. There isn’t really a definitive answer to the question of what is excessive, but it’s not just a matter of an hourly rate in the case of a director.