Self-employed spouse working for ltd company

Can a spouse invoice their partner's limited company?

Didn't find your answer?

  • Spouse A is registered as self employed with HMRC
  • Spouse A also has another full time job, on payroll, with a different company
  • Spouse B has a small ltd company
  • Spouse A helps Spouse B with projects here and there and invoices Spouse B's ltd company as a freelancer

Is this fine? Is there a rule that says that spouses need to be on payroll? 

Replies (29)

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By tracey2412
03rd May 2024 11:44

if spouse A self-employment & what they do for other clients is the same / similar as what they do for spouse B, then surely that's all ok?
if you mean spouse A is ONLY self-employed to do whatever they do for spouse B then harder to prove real 'self-employment' (like anyone with just one client).
In that case if spouse B is Ltd & presumably runs a payroll for himself anyway, where's the hardship in adding her as an employee also? If he's the only employee & they can justify her salary at £9100 or above for whatever she does, there are benefits to that? (Employers Allowance? pension contributions for both?)
I could of course be missing something utterly obvious?

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Replying to tracey2412:
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By User deleted
03rd May 2024 12:02

Spouse A does not have other clients yet, but will do soon and will be doing the same kind of work.

Also, I don't understand your point on 'true self-employment'. As mentioned, Spouse B has a small company...only £60k annual turnover. Are you referring to IR35?

The reason for not running payroll is that it doesn't seem necessary. As mentioned, Spouse A only helps here and there and is not have any fixed, regular renumeration. We are talking about between 90-600GBP per month max.

My question is whether everything is fine and above board.

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Replying to User deleted:
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By Paul Crowley
05th May 2024 17:43

Always learning
That should mean that you want to learn, not have yes/no when there are better options
Are you saying that the company is not operating a payroll for the director?
If not why not?

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Replying to tracey2412:
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By User deleted
03rd May 2024 12:05

tracey2412 wrote:

if you mean spouse A is ONLY self-employed to do whatever they do for spouse B then harder to prove real 'self-employment' (like anyone with just one client).

Per HMRC: "A sole trader is not limited to having just one client or multiple clients. Self Assessment and being a sole trader (self employed) do not account for the number of clients you may have. It is not relevant for tax purposes. The number of clients does not affect being self employed or registering as a sole trader."

Am I missing something here?

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Replying to User deleted:
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By richard thomas
05th May 2024 15:15

We all are - clarity of expression and grammaticality from HMRC.

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By Matrix
03rd May 2024 12:06

Per above I would payroll as another NI allowance but watch out for pension.

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Replying to Matrix:
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By User deleted
03rd May 2024 12:12

The client prefers not to, so the question is, is there legal obligation for him to run payroll for his wife in this scenario?

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Replying to User deleted:
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By Matrix
03rd May 2024 12:15

You should get your client to run the employment status test to check.

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Replying to Matrix:
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By User deleted
03rd May 2024 12:38

Ah, thanks for that. HMRC:

"Your answers told us you have accepted or would accept a substitute.

This suggests the worker is self-employed for tax purposes for this work."

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Replying to User deleted:
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By FactChecker
03rd May 2024 13:12

You've not mentioned about each Spouse's role/involvement in the company ... as in Directorships, shareholdings, etc ... which might be relevant.
[BTW I hope what sounds like a OMB business has more than one Director?]

The problem is that you're not asking the 'right' question:
"Is there a rule that says that spouses need to be on payroll?"
... that's easy, No (but that doesn't mean the proposal is fine).

I admire your keenness to learn, but sporadic one-offs on a public forum aren't really your best option for doing that.

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Replying to FactChecker:
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By User deleted
03rd May 2024 13:30

- one director - Spouse B, 100% shareholder

Spouse A is not a director nor shareholder.

Appreciate the advice, however I am just interested in people's views on the matter. I am not using answers on here to advise the client.

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Replying to FactChecker:
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By Paul Crowley
03rd May 2024 14:49

Agree
No second director will cause the business a problem should the worst happen.

The second person being paid above the secondary threshold for just a month also means Employers allowance available. Far better tax planning.

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Replying to Paul Crowley:
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By User deleted
03rd May 2024 14:52

I don't see how having a second director makes a difference, please could you expand on that?

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Replying to User deleted:
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By Paul Crowley
03rd May 2024 14:56

On death the company bank account will be frozen for a good few months. Probate needs sorting before the bank will free it up

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Replying to Paul Crowley:
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By User deleted
03rd May 2024 14:58

The pay ranges from 90-600 gbp per month, so no Employer's NI would be attracted anyway. Spouse A pays full income tax and any NI due on self assessment.

Spouse A doesn't exclusively work (freelance) for the ltd company, as they are also employed by another company.

There is no regular pay for the work Spouse A provides, it's variable monthly.

All documentation is in place - invoices from Spouse A, and transfers to Spouse A from the ltd.

I don't see any legitimate tax issue? Spouse A is a legitimate supplier to the ltd company.

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Replying to User deleted:
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By Paul Crowley
03rd May 2024 14:38

Really? Has the employer had others doing spouse's work. Best to prove it by getting spouse to send a substitute, and paying the spouse for that work.

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Replying to User deleted:
Stepurhan
By stepurhan
03rd May 2024 15:13

AlwaysLearning24 wrote:

Ah, thanks for that. HMRC:

"Your answers told us you have accepted or would accept a substitute.

This suggests the worker is self-employed for tax purposes for this work."

Note, HMRC will only stand by the results of that test if you give true answers.

Would the client really accept a substitute instead of their spouse doing the work? I think that highly unlikely and I suspect HMRC would think the same.

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Replying to stepurhan:
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By User deleted
03rd May 2024 15:27

Checked without that clause, and it still stands the test with the result remaining as self-employed. Everything was answered honestly anyway.

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Replying to User deleted:
Stepurhan
By stepurhan
03rd May 2024 15:37

I've already pointed out why one answer appears suspect. If I were you, I would check there aren't any other answers that skew the real position to get the self-employed result in a similar way instead of just looking at that one question you highlighted as key yourself.

But I'm not you. You're the one that will have to defend your answers as honest if HMRC challenges it. If you're happy then go for it.

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Replying to stepurhan:
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By User deleted
03rd May 2024 15:36

Also, the pay ranges from 90-600 gbp per month, so no Employer's NI would be attracted anyway. Spouse A pays full income tax and any NI due on self assessment.

From HMRC's perspective I don't see how this would be a tax issue.

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Replying to User deleted:
Stepurhan
By stepurhan
03rd May 2024 15:39

You don't have to convince me. I have nothing at stake if you are wrong.

But the very fact that you decided to post this comment implies a lack of good faith in asking the question. It sounds like you've already decided what route you are going to take, and just wanted the forum to rubber stamp it for you. If, as you say, you can't see a tax issue from HMRC's perspective, why did you even bother asking?

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Replying to stepurhan:
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By User deleted
03rd May 2024 15:42

Why are you taking it so personally? Firstly, the burden is on the client, not me. Secondly, there's nothing wrong with playing devil's advocate and challenging other professionals. It's the best way to learn in my opinion :)

Nonetheless, thanks for your contribution to the thread...and no need for assumptions about me!

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Replying to User deleted:
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By FactChecker
03rd May 2024 16:40

Assumptions are all that are available to us in the absence of a full set of details ... that's the nature of the beast (forums not stepurhan)!

But the point is that's slightly aggravating when you change tune in mid-thread.
If you had stated upfront that you wished to play devil's advocate (and made clear your position on a clearly defined topic) then that's fine ... any responder knows what they're getting into.
But you posted an unclear scenario with a simplistic question ... and then drip feed us with snippets, before announcing you were merely playing devil's advocate.

BTW "the burden is on the client, not me" ... hmmm.
The first 'burden' (I'd have called it a liability not a burden) is on the taxpayer, if you mean liability from HMRC's perspective. But if that taxpayer is your client and has followed your suggestion/advice (whatever you call it), then the second liability falls squarely on your shoulders from the client's perspective - which is why you have PII.

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Replying to FactChecker:
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By User deleted
03rd May 2024 16:41

Fair enough, will take that on board!
Happy weekend all :)

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DougScott
By Dougscott
03rd May 2024 13:15

Remember if Spouse A is self-employed they can't benefit from the £1000 disregard/deduction as they are a connected party.

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Replying to Dougscott:
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By Paul Crowley
03rd May 2024 14:46

That ruins the whole idea.

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Replying to Paul Crowley:
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By User deleted
03rd May 2024 14:51

No it doesn't, as they aren't choosing this method as a tax-saving method.

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Replying to User deleted:
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By Paul Crowley
03rd May 2024 14:59

In that case the payroll option wins hands down.

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Replying to Paul Crowley:
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By I'msorryIhaven'taclue
05th May 2024 15:45

Esp if the wife gets paid >£758.01 in any of the 12 months, as that should invoke EA for the director.

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