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Trading allowance

Is there any restriction on jobs for the family

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Personal tax client has a property they rent out. Her boyfriend and father (neither of whom of S/E as both as employed full time) have done work on the property. My client has paid them both £500 for their labour.

Client has treated this as an allowable expense and both boyfriend and father have not declared their £500 income under the trading allowance.

I am assuming this is fine as I cannot see any restrictions. Does anyone disagree?

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By Tax Dragon
03rd Jun 2020 16:47

It's strange that you are asking about the tax for two people who are not your clients, not the one that is. The question you should be asking yourself is whether the payments are allowable.

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By mg200
03rd Jun 2020 17:00

For the benefit of the tape, I have not edited my original question.

"Client has treated it as an allowable expense....I am assuming this is fine as I cannot see any restrictions. Does anyone disagree?"

As for acting for family members. It's quite common in my industry when acting for a client that pays family members to ask for advice on the tax treatment on them too. Employed individuals don't have an accountant to act for them when receiving a small income.

But thanks for your interest in my question.

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By Tax Dragon
03rd Jun 2020 17:28

mg200 wrote:

It's quite common in my industry when acting for a client that pays family members to ask for advice on the tax treatment on them too.

What industry is that?

To answer your shortened question.... I don't know. You've provided squat by way of information. A useful test might be: would your client have paid me £500 to do the same work? If not, then it's probably not allowable.

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By mg200
03rd Jun 2020 17:58

The industry is the 'accountancy industry'...it's bizarely off point but here is a typical scenario....

Individual visits accountant as they have some income assessable to tax. They also state that their wife or husband also receives a small income and asks whether their spouse is liable to tax. Rather than send them away and suggest to them that it is a strange question and 'why isn't their spouse getting separate advice', I put myself in their shoes and decide to be their family accountant who will hopefully act for both.

Anyway, lets park that scenario (and hopefully you will?)

If, as a property owner (AST), the client needs to do some end of tenancy work (cleaning, mending, fetching and carrying) but doesn't have the time then yes, they will need someone to do it for a fee. That is why I don't doubt that it is allowable - as my question alluded to.

The reason I ask for a second opinion is it is open to abuse and I haven't seen the usual cowboy accountants telling everyone with property income to pay their spouse, son, dog and grandad £1000 each for labour.

Obviously in that scenario it doesn't work for me. But I've come across the odd one man band who employs a spouse who clearly doesn't do any work for the business and has no other income.

There are some restrictions that are in place when it comes to connected parties (i.e. Employment Allowance, trivial benefits etc etc), but I have never heard of one in respect of the trading allowance.

I am making the assumption that there are none and came here for someone to challenge my assessment. But to answer your question again - yes, my client would have paid a suitably qualified person the same £500.

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Replying to mg200:
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By Accountant A
15th Jun 2020 18:24

;oug;

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By Tax Dragon
03rd Jun 2020 18:54

The big players in the OP's industry have a simple rule: don't do work not governed by a letter of engagement/contract.

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By mg200
04th Jun 2020 09:17

I have now signed up the husband as a client. All PII and engagement letter is in place

He has employment income £20k per annum and nothing else to go on his tax return. [Please don't open up any distraction around the requirement to do a tax return or whether I am charging the correct amount of fees as this is not relevant to my post]

The only other potential thing to add to his tax return is some labour he did for his wife who owns a rental property. She paid him £500 for doing end of tenancy work which was commercially valued at £500.

I believe that this is covered under the trading allowance and no tax falls due. Unless there is any restriction around connected parties. I wonder if others agree.

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