a client has been paying his son a salary of £18k pa for the last 8 years and he also receives money from the touring company which promotes comedians. he is winding down the tour side of the business and wishes his son to move on ;-). if he pays him a redundancy of £20k inc SRP of approx £3k will that be tax free (no contract) and will it qualify as a deduction from the client's self-employed business or might there be complications? N
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"a client has been paying his son a salary of £18k pa for the last 8 years and he also receives money from the touring company"
What does the salary have to do with the touring company operation? The also "receives money" , is this the son that also receives money and if so is this also paid as a salary?
Is he paid a distinct salary from that business ? Are there two distinct business entities?
thank you DJKL. Yes there are 2 entities the touring limited company is owned by the father who also has a self employment business as an artiste manager. These 2 ventures are totally separate and both vat registered. it is not proposed that the limited company pay the son anything as he is a self employed contractor with other clients and not on payroll
Take a deep breath and set out the facts rather than just a stream of consciousness.
I think your Client is a sole trader with Son as employee. So presumably Client is operating PAYE and submitting RTI returns in respect of monies paid to Son? If not, then it's hard to justify Son being eligible for a redundancy payment.
Are there other employees? Over 12 months' pay is very generous. Is there any history of Client being so generous to people who are not family members?
If
thank you Paul. Yes the son is now the only employee of the father's sole trade (there were others more than 6 years ago) PAYE has been operated and all RTI submitted for many years. He has been a client for 35 years and has always been generous to his employees though its a bit tricky to look so far back
So does the sole trade business(which employs the son) have any connection with the limited company that operates the tour business which is apparently the business which is to be wound up/cease operating?
Thank you D, thats a good and fair question and the reason for my post as something is nagging away at the back of my old head.
I hold that they are separate businesses each with their own risks and clients hence the separation .
The limited company will continue to exist (though trading is hugely reduced) as it holds investment properties and that poses other problems re extraction to be dealt with another time . But the question remains re the payroll operated by the self-employment and the projected redundancy payment therefrom
If the Sole Trade is continuing, and the son ceasing to be an employee of the ST will have limited impact onthe ST's level of activity, it sort of begs the question if son's salary was ever W & E for the ST trade?
thanks again D, it certainly was hence the self employed contractor status and payment for the work on the touring company in addition to his PAYE employment.
If the Sole Trade is continuing, and the son ceasing to be an employee of the ST will have limited impact onthe ST's level of activity, it sort of begs the question if son's salary was ever W & E for the ST trade?
I still don't understand who has been employed/self-employed doing what for which business but the OP might find these useful:
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim47205
"If the employee’s employment was wholly in the employer’s trade, the whole of a statutory redundancy payment can be deducted. If the employment was only partly in the employer’s trade (for example, where the employee partly serves the employer in his private capacity)"
And
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim47210
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim47200
thank you again David I have read all the BIM links. You have been most helpful as has DJKL and have taken onboard all comments . I have relayed my thoughts and concerns to my client. I am slightly less befuddled now :-)