Wife and children as employees nonsense or am I missing something?

Wife and children as employees nonsense or am I...

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What is the position with wives and minor children on the payroll? If there is a joint bank account between spouses, isn't it a bit of a joke giving the wife a cheque which is then deposited back into the joint account? Regarding 16-year old children who have no bank accounts in the name? It would be interesting if someone has any answers.Thanks.

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By sparkler
14th Mar 2013 12:44

Evidence of actual payment

Presumably this is a sole trader who does not have a business bank account?

Physical payment of the wages shows that the payment actually took place, and wasn't just a "book entry".  

In the case of the wife, either a cheque or cash payment would be fine, even if this is deposited back into the couple's joint bank account afterwards.  If it's a personal joint account rather than a business account, I wouldn't have thought the bank would charge a fee for a cheque payment, so it won't cost anything.

For the minor children, presumably they are paid in cash which they then spend or deposit into piggy banks.  The children may not have bank accounts in their own name, but presumably they actually wish to receive payment for the work they have done for the family company!

Obviously the "audit trail" of payments only becomes necessary if HMRC investigate, but better to have proof that a payment was made, either by a cheque payment or cash withdrawal, then HMRC disallowing the wages because they weren't actually paid...  

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Replying to Martin Sweeney:
By johngroganjga
14th Mar 2013 13:10

Don't disagree with anything that sparkler says, but I would love to cross swords with any non-accountants in HMRC who would try to argue that a book entry was not payment.

There is an additional point that proving that payment has been made may not be enough on its own. It will also be necessary to show that the wife and minor children actually did productive work in the business to earn the sums paid to them.

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RLI
By lionofludesch
14th Mar 2013 13:58

Two points ...

Agree with johngroganjga.

 

Evidence of payment is nice but not compulsory.

 

You need to justify the wage in terms of work done.

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By alattax
14th Mar 2013 14:02

I think this is one positive for RTI.

Open a PAYE scheme and report all payments on or before payment as required.

This is all good evidence of payment, 

However, they still need to be doing work appropriate to the payment, and need to show sufficient resources if made by cash.   

 

 

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By The Innkeeper
14th Mar 2013 15:51

I am concerned

that if this is a sole trade then would childrens wages satisfy the 'wholly and exclusively' test ?

I am also long enough in the tooth to remember in pre sa days having spats with the Inland Revenue that unless wages to the wife could be evidenced as having been paid  into a seperate account under her sole control no deduction would be allowed.The best way to evidence this was to have wife's wages paid into an account under her sole name.I also remember having lost the claim if there was merely a'book ' entry.

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By johngroganjga
15th Mar 2013 14:12

Book entries

Arguments that book entries are not real transactions with economic consequences habitually come from non-accountants in the Revenue but I would like to think that a tribunal would not wear it - but perhaps I am naive!

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