Employing family members
Written on 10/08/2018

HMRC have raised a flag to employing your university children through your company to bag the personal allowance.  At £11,850 tax free (with net pension top up available too!) this shouldn’t be one to pass by sniffing. 

The key point, as with any business expense, is that the expense, in this case the wages/salary, have to be incurred “wholly, exclusively and necessarily for the purpose of the trade.”  HMRC will ask if the payment is actually made of the purpose of the trade, or if there is another motivation, say, university fees for little Jimmy?  According to my local accountants https://www.harbourkey.com/employing-family-members/  HMRC has a good track record in winning these cases, going all the way back to 1941, in the case of Copeman v William Flood & Sons.  But if you are still keen to put the ankle biters to work, then note that for children aged 16 to 17 they are entitled to at least £4.20 per hour, and if under 16 they have time limits on working hours.  The youngest age a child can work part-time is 13 (acting excepted).
New Law on offshore holdings
A new law, known as the Requirement to Correct (RTC), dramatically increases the penalties for people who have not declared and paid tax on offshore income or assets.
Individuals have until 30 September 2018 to disclose under the current regime.   After this date, penalties increase and HMRC will have in place information exchange agreements with more than 100 countries significantly enhancing its ability to detect offshore income.   Anyone who needs to normalise their tax affairs by way of a full disclosure should do so immediately and any historical offshore structures should be reviewed to confirm they still work. 
HMRC will be in possession of extensive information in relation to offshore assets going forward. This will include: 

  • Crown Dependency and Offshore Territory information sharing in 2016. 
  • Common Reporting Standard information sharing from 2017 and more jurisdictions in 2018. 
  • New rules in the UK for long term ‘non-doms’ will make offshore assets ‘visible’ to HMRC from 2017/18 for the first time. 
  • Beneficial ownership initiatives. — Data leaks, e.g. Panama Papers.

How can you approach this as an adviser?

It has been said that nothing stills the tongue like pulling a pen out  and noting down what the client is saying.  I think possibly asking a client if they have a swiss bank account might have the same effect – as their eyes and body language will point unmistakably to the door!

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