Clarification – wife’s wages

Clarification – wife’s wages

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What is the maximum wife’s wages (it can be easily justified) that can be put through for 2006/07 without causing tax / nic problems ?
David

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By AnonymousUser
29th Mar 2007 13:37

....and also
make sure that the money is paid and that the client's wife actually does some work to justify the payment.

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By Paul Soper
30th Mar 2007 16:12

Unless she's a director?
The earnings period will be weekly or monthly so not only will you have to make the payment but make sure it is within the monthly equivalent to avoid NIC.

If the business is not incorporated NMW will not apply. If it is incorporated NMW does apply unless the spouse is a director.

You could provide for a bonus as a specific provision and make sure that the amount was paid within 9 months of the end of the AP by monthly instalments, giving you tax relief on the payment now with the liability deferred but that would effectively restrict you to 9/12ths of the 2007/08 limits as that is when the payment is being made.

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Euan's picture
By Euan MacLennan
29th Mar 2007 12:46

£4,368
... which is the NI Lower Earnings Limit and assuming that this is her only or main job for income tax purposes.

If you are not bothered about making 2006/07 a qualifying year for state benefit and pension purposes, you can pay up to £5,035, the NI earnings & tax threshold. Although no PAYE is due up to £5,035, you would need to set up a PAYE scheme and submit end-of-year P35 & P14/60 returns to establish the entitlement to be treated as having paid nil rate NI contributions.

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By AnonymousUser
29th Mar 2007 13:38

... and not forgetting

the national minimum wage rules.

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By User deleted
29th Mar 2007 15:36

..yes, but
making sure that she is paid at a rate which is reasonable for the duties involved, and also making sure, if she is a tax credits claimant, who claims to be working x hours per week that she is paid for x hours
. no but
See Phil's comments
yes, but
See Jim's
but
See Euan's.

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By User deleted
29th Mar 2007 18:37

As the question is phrased-nothing !
Your starting point has to be the other end.

What does the wife do, and what is a fair wage for that? Has she a written contract of employment spelling out her duties and remuneration-or at least the basis on which her remuneration is to be paid..

Now you have all that documented, is it tax effective from the family's point of view to pay her more, or less, or nothing.?

If less or nothing, is she going to waive her contractual entitlement?

If that sounds pedantic, it is only what would be approriate for any employee-indeed arguably even the owner director himself. It is also a good defensive argument as part of the rebuttal of an IR35 problem.

Having arrived at this point, is the question how do the family and company pay the minmum tax?

is it how most cheaply can the profits be paid out ?

The fatal error is to allow HMRC to argue that the wife's wages are arrived at arbitrarily, to suit the circumstances from year to year.
This will alos become progressively more significant as profits
increase, and pension contributions start becoming a siubstantial figure.
Time spent in putting the right documentation in place will pay off over the years.

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