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Cover for sole director on mat leave?

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Hi, first time question, so go easy on me peeps!  I have a client who is a sole owner/director/employee of her business and is going on maternity leave shortly.  Her buiness will slow down but not completely halt when she is off, and her husband who is in the same line of work, will be doing any work that is required above the10 KIT days.  Her question is this - does her husband have to charge anything to the company, or can he do the work for free so as to avoid any implication on his personal tax situation?  My gut says no he can't, but I can't find any evidence to back this up.

Thanks

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By paul.benny
04th Jul 2019 14:11

It's more a question of does the company have to pay him? If he is working for wifeco and he's not being paid, that's a breach of minimum wage regulation.

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By Tim Vane
04th Jul 2019 14:33

Make him a director. Then all is good.

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By Accountant A
04th Jul 2019 14:47

alisondonaldsonca-AT-yahoo.co.uk wrote:

My gut says no he can't,...

If that's how you give advice, I'd not be posting with my real name in case a client saw it.

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Replying to Accountant A:
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By [email protected]
04th Jul 2019 14:54

Really, is there any need for that kind of comment??? If you don't have anything nice/helpful to say, don't say anything at all. Clearly that is not the basis on which I'm going to provide my client with advice - I am using this as one of many sources of information before I go back to my client. We can't all know everything, which is why forums like this exist supposedly so that we can support and help each other.

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Replying to Accountant A:
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By Rammstein1
04th Jul 2019 15:03

People moan when anonymous posts are made and this one isn't anonymous.
People moan when OP's do not give their own opinion and this one has.
Lighten up!

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By fawltybasil2575
04th Jul 2019 23:34

@ alison . . (OP).

There are very substantial numbers of people who, for different reasons (especially philanthropy, offering service unpaid so as to impress prospective future employers, and other reasons) carry out work as volunteers, content to receive no payment.

I am entirely unaware of any regulations which would prevent your client company’s accepting an offer from the director’s husband to work on such a “voluntary” (ie unpaid) basis, so as to keep the company’s “ticking over” in the manner indicated by you.

It may possibly be that, during the director’s maternity absence, the company’s substantially reduced work output will result in the company’s operating at a loss, such that emoluments paid to the husband would increase that loss; and thus conceivably be harmful to the company’s financial position, and indeed be prejudicial to the interests of creditors.

Whilst such adverse consequences may possibly not be relevant to your client company, they certainly could be so relevant to other companies faced with same dilemma as your client company.

For that reason, it would be entirely inappropriate to impose legislation on companies, which prevented their accepting offers, whether from spouses of directors or other third parties, to assist those companies on an unpaid basis.

Paperwork should ideally be prepared, signed by the director and her husband, to state that the work is being carried out as a volunteer (so as to thwart the albeit distant possibility that HMRC would subsequently contend that Minimum Wage Regulations had been breached).

Your client company should of course ensure, as a separate matter, that it complies with other legislation which might be relevant to the husband’s proposed duties, including Health and Safety regulations (such other legislation is relevant to all “voluntary workers” and can readily obtained from google-type research).

Basil.

Thanks (2)
Replying to fawltybasil2575:
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By thestudyman
05th Jul 2019 07:26

fawltybasil2575 wrote:

@ alison . . (OP).

There are very substantial numbers of people who, for different reasons (especially philanthropy, offering service unpaid so as to impress prospective future employers, and other reasons) carry out work as volunteers, content to receive no payment.

I am entirely unaware of any regulations which would prevent your client company’s accepting an offer from the director’s husband to work on such a “voluntary” (ie unpaid) basis, so as to keep the company’s “ticking over” in the manner indicated by you.

It may possibly be that, during the director’s maternity absence, the company’s substantially reduced work output will result in the company’s operating at a loss, such that emoluments paid to the husband would increase that loss; and thus conceivably be harmful to the company’s financial position, and indeed be prejudicial to the interests of creditors.

Whilst such adverse consequences may possibly not be relevant to your client company, they certainly could be so relevant to other companies faced with same dilemma as your client company.

For that reason, it would be entirely inappropriate to impose legislation on companies, which prevented their accepting offers, whether from spouses of directors or other third parties, to assist those companies on an unpaid basis.

Paperwork should ideally be prepared, signed by the director and her husband, to state that the work is being carried out as a volunteer (so as to thwart the albeit distant possibility that HMRC would subsequently contend that Minimum Wage Regulations had been breached).

Your client company should of course ensure, as a separate matter, that it complies with other legislation which might be relevant to the husband’s proposed duties, including Health and Safety regulations (such other legislation is relevant to all “voluntary workers” and can readily obtained from google-type research).

Basil.

With regards to preventing payment of minimum wage, simply being made an office holder (director) should suffice as it brings an assumption of not being an employee also, unless an employment contract exists between the director and company.

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By fawltybasil2575
05th Jul 2019 10:23

@ thestudyman

I can envisage several dangers from following the “appoint the husband as a director” route, largely founded upon the importance of company law provisions which determine the crucial rights and duties of directors [albeit the strength of such dangers will depend in part on several factors, including the nature of the work to be undertaken, the strength of the marriage, and the husband’s contact with customers and other third parties] including:-

[1] The possibility of the husband’s later claiming that the directorship office was a sham appointment, such that he claims the Minimum Wage.

[2] The possibility that HMRC may claim that the directorship office was a sham, and that the company was in breach of Minimum Wage legislation, rendering its being liable to penalties.

[3] Claims against the company (by customers and other third parties) arising from inappropriate actions, by the husband/director, arising from his holding that important directorship office.

[4] If and when the marriage breaks down, a claim (by the husband) that his rights had been improperly restricted, whilst holding office, for which compensation is due.

Whenever one seeks a solution to a problem by the use of a “device” which has (shall we say) the “whiff of artificiality” then one must look outside the confines of the matter at issue – in this case, the “appoint the husband as director” solution could IMHO be fraught with dangers. Whilst some or all of those dangers may (depending on circumstances) possibly be more theoretical than real, one must compare and contrast that solution with possible other solutions. I believe there to be a more straightforward and effective solution, namely the simple “volunteer” document which I suggested in my last post.

As a final comment, in relation to your reference to employment contracts, may I respectfully comment that, as you will no doubt be aware, such contracts do not need to be contracts in writing, in order to be legally valid.

Basil.

Thanks (3)
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By [email protected]
09th Jul 2019 12:59

Thanks all for some really helpful advice, much appreciated, and will be useful!

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