Purchasing marketing services from my partner

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Was hoping to understand whether there were any restrictions on my Limited company purchasing social media/marketing services from my partners start up marketing company (Self employed).

My limited company has not had any revenue for the last couple of years (as I have had other employment) but I'm looking to create some contacts and have market research completed on future contracting opportunities for the business. This would in the short term create a loss but there is enough retained earnings and cash in the business to pay for the services.

My partner is out of work and keen to do the work for me. I would rather not have an employee, would I/we be breaking any tax or other rules if she set up a self employed marketing company and invoiced my business monthly for marketing/research services. It wouldn't require extensive work so would be for 3-4 days a month.

Thanks in advance

Replies (7)

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By David Ex
24th Jan 2023 15:38

What’s possible and what’s advisable aren’t necessarily the same. You’ve got a budget for marketing and you should also have one for accounting and tax. Good professional advice pays for itself.

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RLI
By lionofludesch
24th Jan 2023 17:01

She's either self employed or she owns and is employed by a company. They're direct opposites.

As David implies, is she any good at marketing ? That's your first question.

In theory, there's nothing to stop her doing the marketing as a self employed trader. But the danger is that you'll treat her as an employee and HMRC might come along and re-categorise her and you'll be liable for her tax and NI, plus penalties. There's also the possibility that HMRC might say that the amounts paid to her aren't commensurate with the work she does. In that case, you might not get a tax allowance for the expense but she'll still be taxed on the income. There are plenty of potential pitfalls. If you do it, make sure you have a contract with her which is watertight.

Good luck.

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By Catherine Newman
24th Jan 2023 17:03

She should keep a timesheet and only charge for the hours worked and at a fair market rate. If you pay her fixed hours she would, in all probability, be an employee and PAYE would have to be applied.

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By WhichTyler
24th Jan 2023 17:15

Seems like an ideal opportunity to set up an accountant as your mistress, then business planning is taken care of as well as marketing.

Accountants are universally great in bed, if that helps the decision making

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By AdamLoxley
25th Jan 2023 10:29

Thanks to the people who provided an answer without trying to be a smart [***].

The role that needs covers quite a few aspects, as I just haven't got the time to do it myself currently. A large part of the requirement would be researching future government tendering opportunities to understand the future areas I should focus on. She has previously worked within a research role so shouldn't be a challenge for her.

I had (stupidly) not considered the element of allowable expenses, I have already paid corporation tax on the surplus I was going to pay her from so wasn't planning to claim an expense for it but that wouldn't work in my books going forward.

I wasn't going to do the requirement based on hours, it was going to be a contract based on outputs rather than working hours to provide social media/marketing/research services for 6 months.

It may be easier to add her as a director/shareholder and pay her dividends rather than pay her for the work she is going to do for me, if it could give me potential problems going forward. It was only to keep her going for 6 months before she looked at full time employment again.

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Replying to AdamLoxley:
RLI
By lionofludesch
25th Jan 2023 13:59

AdamLoxley wrote:

I had (stupidly) not considered the element of allowable expenses, I have already paid corporation tax on the surplus I was going to pay her from so wasn't planning to claim an expense for it but that wouldn't work in my books going forward.

If you've already paid Corporation Tax on the surplus, that wouldn't be affected by money you intend to pay your partner in the future. I'm confused by your comments. Are you saying you've run out of work and are looking to her to find you some more ? If not, and you're still working, you'll get your tax allowance (or rather, your company will) by deducting the expense from the income at the time. I don't see the issue here.

In any event, your plan seems ill considered and needs further thought. In particular, remember that any dividends you pay must be in proportion to the shareholdings. Discuss your plan with the company's accountant. If the company doesn't have one, appoint one.

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By CJS88
25th Jan 2023 13:30

Why not register a payroll and pay her say £800 per month (rising to say £1,000 in April)

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