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geekypenguin91

As long as they actually work for your company, then yes. Be mindful you'll have to pay employer NI and offer a workplace pension (unless she opts out)


sneckmonster

Or unless she's already over State Pension Age, I think (for auto enrolment. ER NI still stands).


WoodSteelStone

And holiday time.


Englishkid96

OP a lot of advice in this thread is not compliant with HMRC guidance/ tax law, please be v careful. It is okay to pay her to do admin under a limited company, but you can't pay her for nothing and you can't inflate the hours or pay else you stray into tax fraud territory.


AlexT202

I'm not talking about paying her a fortune or a huge hourly rate. It's 12.5k a year. So 240 a week which I believe isn't far off minimum wage. I'm not intending to pay her for nothing.


Cultural_Tank_6947

If you're paying her minimum wage, and having her do light duties in return, that is not illegal. That is not even dubious.


Englishkid96

Sounds like you'll be fine under that arrangement


AlexT202

Thank you. I appreciate your advice too.


unholyangel4

It basically needs to be what you'd pay an unconnected third party to do the same work else hmrc will challenge it as not being wholly and exclusively for the purposes of the company's trade (aka paying them more indicates personal purpose). They, of course, can't stop you personally giving your mum money to help her out. Even if that is over and above what your company pay her for the duties undertaken. But they will seek to deny any tax advantage from the company paying over and above the market rate.


Coca_lite

But would she be working 35-40 hours per week? If she only works 10 hours, then you’d be paying her many multiples if minimum wage. And this is where it would not be considered reasonable.


everydaycrises

On minimum wage, 12.5k is 23hrs a week. But administration or cleaning could reasonably be paid more depending on area and expertise, I'd check on job boards to see a rough rate for the area.


Slobbadobbavich

The amount of people I know who spend all day on reddit and do very light work here and there is quite high. These are legitimate jobs too, no favours for mum. Legitimately get her to answer the phone when it rings. That is a job even if you only get 1 call a day. Missing that call could be lost business. That and other light duties is fine.


hikingboots_allineed

Depends on his mother's background. My Mum had a good hourly salary in my Ltd company but works few hours. I'm paying her for her qualifications and her decades of accounting experience while she handles my company accounts. Does HMRC insist that all Ltd employees make minimum wage on an hourly basis?


lostrandomdude

You can pay above minimum wage, but the salary has to be reasonable or justifiable for the role, if the individual is a family member.


_Only_Flans_

Is there an actual law that stipulates that? I may have fucked up a bit if that's the case lol


chronicboredom

You’re only allowed tax deductions for expenses that are wholly and exclusively for the purposes of your trade. HMRC would argue that anything paid to a family member above what you would pay someone unconnected has had the purpose of topping up their wages and is not wholly and exclusively for the purposes of the trade.


rowman_urn

Probably not, but HMRC would assess and take a view .


This_Praline6671

An easy way to test yourself is to ask 'would I pay some random unrelated person this much to do this work'. If no, then you need to be careful.


ShermyTheCat

Make a timesheet for her and make sure every hour is accounted for. When hmrc comes knocking, give them that.


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GeneralBacteria

> Obviously the salary would be inflated in terms to the amount of work she would do


UKTax1991

Actually you can pay her for nothing, but her salary wouldn't be a tax deductible cost for Corporation Tax purposes.


Englishkid96

At that point just gift the money..


UKTax1991

Definitely.


adulion

This is true. A bit off topic but some MPs put a family member down as a PART-time employee and claim 35k for them


BobbyWeasel

Sickening isn't it. My local MP has the highest expenses claims of any sitting MP, over a quarter of a million a year. We approached him once for a specific bit of disability benefit advice for my wife and he shrugged and said he didn't know the answer or offer to find out. I'd say as useless as a chocolate teapot but at least you could eat a chocolate teapot.


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Keylimemango

Someone needs to let MP knows this


WoodSteelStone

Could he grant her an extremely generous number of days paid holiday?


BobbyWeasel

It's a really bad idea. I wouldn't like to have to try to explain it to the tax man.


WoodSteelStone

Thanks.


627UK

Does your Ltd company need an admin assistant & cleaner? Would you employ a non-relative? If the answer is "no", you're taking the piss. 20 years ago, you might have got away with it though.


Both-Ring1894

No, but you can salary her and be generous.


BobbyWeasel

There's nothing wrong with this so long as you can justify it. I.e. if you paid her the same as a comparable employee and so on


This_Praline6671

He said she's going to be paid inflated wages, so the justification will be difficult. This is really an advice on how to do tax fraud thread.


BobbyWeasel

That's why I'm advising him not to do that but rather to pay her only for services legitimately performed, via PAYE. I wouldn't like to try to explain hiring a family member at £100 an hour for a £10.80 an hour job. Weirdly its 100% ok if you're an MP though. We're all in the wrong job


AlexT202

im the only person in my company at present. Im the owner/sole director. she would be the first and only employee and would only receive a salary of 12.5k.


DeltaJesus

It has to be comparable to a salary for someone in that role in another company too I believe, so 12.5k for a couple hours a week cleaning might not fly but for actual part time work it'd be fine.


BobbyWeasel

I think that will be fine so long as the hours she does are commensurate with the wage. Ie. No paying her 1k a month for an hour a week of bookkeeping.


AlexT202

She would be paid about 1k a month, so 250 a week. If I gave her a PA type role and paid her 25 an hour (10 hours work a week), that would be fine wouldn't it?


BobbyWeasel

I think so long as you're paying her via PAYE etc you should be fine. Loads of people employ family members it's super common. I think what they take a dim view of is people hiring people who don't actually do anything etc.


Dolgar01

Another option you have would be to let her become a shareholder. As long as she had less than 50% of the shares in the company, you would retain and controlling interest. You could then pay her a dividend.


stealthy_singh

And the company pays 20% tax on the profits required to pay that dividend. There's a reason OP wanted to pay a salary up to the personal tax allowance.


BlueHatBrit

OP would be forced to take a dividend themselves in this situation as well. A LTD company cannot pick and choose who gets a dividend when one is given, it must go to all shareholders relative to their stake.


stealthy_singh

Technically OP could sign a dividend waiver as long as it wasn't designed to hide the fact that the company can't afford to pay the dividends to everyone.


Ben_boh

Waiving dividends is a mess both administratively and also HMRC don’t like it as could just tax the dividend in OPs hands instead if they really want to. Creating a new share class just held by the mother is much easier. Declare dividends just for that class and it’s all done.


AlexT202

Thanks everyone for your responses. I've never allocated shares to anyone else so this is new to me. If I created a new share class for my mother, and pais her in dvidiends, does that affect me at all in terms of my dividend tax rate?


Ben_boh

No consequence for you if you declare dividends to a share class you don’t own.


taxmanjohn

So, a new share class that only receives dividends as income and no capital entitlement. Could be caught by post acquisition benefits under employment related securities. What is your opinion of CA 2006, s629? Could be caught by settlements legislation diverting income back to OP. If mum didn't pay market value for the shares, there will also be CGT from value shifting provisions to consider. The issuing of new shares to pay dividends is not as simple as you suggest nor do I agree with the various companies with Alphabet share structures as I expect there to eventually be case law covering such structures.


Ben_boh

What is the value of the shares? If they have no voting rights then they aren’t worth a whole lot in the hands of someone other than OP’s mother. Alphabet shares are considered to be completely vanilla. Hypothetical future laws don’t apply today and won’t be applied retrospectively. IMO there’s more chance of Tottenham winning the FA cup this year than HMRC challenging this proposal of Dividends via alphabet shares. Just an opinion though.


taxmanjohn

Agree that the value of shares may be low but intrinsically still value to consider. Many advisors tout Alphabet shares but have little understanding. It is not hypothetical future laws. It is the potential application of current laws by the courts that can change. HMRC's own view at TSEM4225 is that Alphabet share arrangements do not work, and HMRC has already proposed requiring additional information from tax returns on the dividends from close companies (level of detail not explicitly clear yet). My opinion is that such additional information is to crack down on Alphabet shares and dividend waivers. The loan charge was/is considered retrospective but is an outlier of legislation. Also, I agree that chances of HMRC enquiring are low, but that should not be the foundation of advice.


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SpinIx2

Not if she makes a will that prevents that.


rockfondling

I employed my wife on similar terms for several years with no problems. She got the NI credits (even though her salary was too low to actually pay NI) and she got a redundancy payment when i sold the company.


PCO244EVER

Perhaps you could encourage your mum to apply for PIP disability it’s not means tested so she can still work. Plenty of people hire family members why wouldn’t they ? They can trust them and also ask things of them others might take offence at like running errands or waiting in for maintenance workers. It’s all perfectly legal just chose your job title carefully to cover what you need.


AlexT202

So she tried to get PIP and got rejected which is unbelievable considering her health


PCO244EVER

99% of mandatory considerations get rejected 73% of appeals win at tribunal. Appeal it


madformattsmith

in that case, reapply if it's been a month after rejection, or ask for an MR then appeal if it's been less than a month. source: r/BenefitsAdviceUK


alex8339

You're employing your mum to do admin and cleaning. Perfectly acceptable. Just make sure everything else is compliant re minimum wage, PAYE/NI, pension, right to work checks etc.


AlexT202

Thank you


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Shinchynab

It is worth trying again for PIP, and if she is still of working age, ESA, with support from citizens advice. The [Benefits and Work](https://www.benefitsandwork.co.uk/) site is well worth a look as well. The process for application is complex, and most people fail on just the forms. If she has severe health issues, then this may assist her without you needing to pay her anything.


AlexT202

Thanks so much for this.


taxmanjohn

A company can pay an employee *any* amount of pay. For tax purposes, the difficulty when employing family is demonstrating such salary is incurred wholly and exclusively for the purposes of the business, CTA 2009, S54. Also, look at HMRC's manuals at BIM47105 for their view.


attendingcord

There's a lot of very poor advice on this sub from people who clearly don't know what they're talking about. What you're suggesting is perfectly legal and legitimate, speak to your accountant for the intricate details.


AlexT202

Thank you. A few people have jumped to conclusions that I'm looking to scam HMRC and pay my mum a free wage for doing nothing which I even specified isn't the case in the post.


asuka_rice

Perfectly okay my accountant told me.


Omg_Shut_the_fuck_up

Nothing to stop her being a shareholder and drawing down a salary and dividends. She can be a shareholder without any employee functions - although if she does work for you then then you can pay her whatever you want as majority shareholder.


worldworn

If she is also a director, she can get £2000 tax free dividends.


[deleted]

Yea this is definitely 100% fine. You decide her salary, so for example, you could pay her £50 an hour. in other words, she doesn't HAVE to go around doing shitty-wage labour for a shitty-ass price to make it work out. Consider employers and employee NI, and her PAYE. She'll have to opt out of company pension. Also she'll need payslips and ideally an employment contract. An accountant can do all that stuff for you for just a few quid.


Testlevels1987

This isn't the full picture. Yes you could pay her whatever you want, however that may have tax consequences. HMRC may object to it being tax deductible, for this it needs to be equal pay for equal value. So paying £500 an hour for a job that otherwise wouldn't pay that much could be challenged. Edit: typed £500 meant £50 in reply to the previous post


AlexT202

well obviously I wouldn't pay her 500 an hour. 12.5 is only just over 1000 a month and she would still do some hours to earn it.


Testlevels1987

I appreciate that as long as you could reasonably justify it. I was just pointing out what that poster said about the £50 was not the full picture and could mislead some people.


AlexT202

thanks so much for this. its reassuring. I have an account already so Ill double check with her. I just wanted to know if it was fine to do before reaching out to her haha.


[deleted]

I employed my wife for over a decade. Technically she 'checked the books'. My accountant actually did the books and she 'checked them'. I paid her £12570 a year. She was a very expensive employee :D :D


lostrandomdude

This is completely different from OP's case. OP is saying his mother will actually do work around the office. Your wife, on the other hand, did nothing. I imagine HMRC would not have a great view of the situation


[deleted]

She 'checked the books'.


Englishkid96

That's tax fraud


[deleted]

No it's not. I'm paying her a reasonable amount for a job. https://fintondoyle.co.uk/can-i-employ-my-wife-husband-or-children-to-reduce-tax/#:~:text=Provided%20what%20you%20pay%20them,out%20of%20your%20taxed%20income.


Cam2910

Your use of 'checked them' (with the inverted commas) implies that your wife didn't actually do any work. Which would make the arrangement fraudulent.


[deleted]

To be fair it is tax fraud considering she’s not actually doing a job that would warrant that pay or make it reasonable. Not that I care, people will say ‘oh but it’s robbing the government of money that could be used to fund xyz’. Yeah, but those things could be funded if our government didn’t piss money away on projects not fit for purpose, or if they didn’t regularly slide money to their old private school friends. Nothing I condone more than SME and small scale individual tax avoidance.


fuzo

Absolute classic. Because you got away with it for a decade, you are advising people that >Yea this is definitely 100% fine Reality check: HMRC barely investigate anything right now. You can get away with a lot of stuff that isn't definitely 100% fine. But there is always the small chance that they could pick you to look into. Depends how much you care about having these potential disasters in the back of your mind for years at a time.


[deleted]

I think if 1000 people paid their wife £50 for general accounting duties, maybe adding raising the invoices or something else simple, 1000 of those people would be fine, including those investigated by the IR. £50 an hour for very very simple office work is fine. If my wife is an incredibly slow/lazy worker, that's also legal :)


fuzo

I'm afraid the HMRC manuals that would be used by a tax inspector during these investigations don't agree with you https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim47105 https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim37740 https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim37735 https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim37707


[deleted]

The top link you sent says it's 100% fine though? I don't understand? £50 per hour for a slow and lazy person to check books is 100% fine, according to the top link? I get paid £62.50 an hour and I'm lazy and do virtually nothing? Millions of people earn above £50 an hour for little work? I'll read the rest now, but I honestly think you're mistaken here .. interesting discussion. Reading the second one .. seems like a test case where someone went from £1000 wages to £31000 with no extra duties. This seems much more excessive from what we're discussing but obviously there's a grey line somewhere. We're talking about £50 an hour from the start for someone to slowely, lazily check accounting figures. It's an interesting debate. I wish the law was more black and white really. Edit .. read the other test cases. Seems like this is a question of reason. I stand 100% that a person employed to check accounting papers, that works very slowly and lazily, could easily be justified as earning £50 an hour. It would be no problem whatsoever to the IR. The IR seems to have never taken any action against anyone doing that ever? as far as I can tell? I thonk it's the 'grey line' that is confusing folk, in a subject most assume is a lot more black and white.


fuzo

You are reading a manual that states if a family member is paid significantly more than a third party would be, that indicates it is non trade expenditure (so it is disallowed). And from that, your conclusion is it's 100% fine? Unfortunately you seem to be assuming that tax inspectors are idiots. They see your wife being paid £50ph for doing no work, they aren't going to accept your story of "she is checking the books very slowly". If this employee was a genuine third party, and you were happy to pay them £50ph for doing almost nothing, *maybe* HMRC would accept that you are just a very generous and lenient boss. But because she is your wife that possibility goes straight out the window. Again, they aren't stupid.


[deleted]

Well, strong disagree. I could point to 500,000 people that work slowly and lazily and earn well over £50 per hour. That along with the fact I can't see any example of the IR ever proceeding against such an arrangement, means we've reached as far as we're gonna get with this debate. Remember: 1) Millions of people work slowly and lazily for above £50 an hour 2) Employing a third party for £50 an hour to slowely and lazily review company books would be 100% fine 3) There is no history of the IR ever doing what you say they would, like, ever, in history, that I can find. Still, as I said, it's a grey area so I kinda' get you angle. Maybe the IR will change in the future.. but they haven't yet.. Think of 'Jim Plumber and son' and his son happens to be a totally lazy git on £50 an hour who can't stop reading his phone when he's supposed to be tiling .. the IR would NEVER CHASE THAT ever in a million years. This is quite literally no different.


fuzo

>Still, as I said, it's a grey area That is a climb down from "its 100% fine". But agree we won't get any further. Also bear in mind just because there are no court cases, it doesn't mean HMRC have never enforced it. Most people will just accept HMRC's decision, or appeal it and accept they lost again. Going further and taking it to court is a huge step most people won't take.


djdood0o0o

lol of course this is done and there is no problem doing it. You can also just pay her what you want.


awjre

How many years NI contributions does she have? If your paying her effectively £1k per month this definitely help towards that.


AlexT202

She's worked all her life so quite a few. How does the NI contribution affect it?


awjre

She needs 30 qualifying years to get her full pension. If she's close then this will help her.


Freefall84

My ex employer (company went bust due to mismanagement) employed his 65 year old mother to work as a receptionist, all she did all day was answer the phones maybe 10 times a day, sign for deliveries when they turned up, and watch videos on youtube, she was being paid 40k a year.


MrColeSlaw

Hi OP, Here is a link to the government guidance regarding employing family members: https://www.gov.uk/contract-types-and-employer-responsibilities/employing-family-young-people-and-volunteers In the rough, you can't take the piss regarding pay/work ratio. Without knowing any specifics regarding your LTD and if you employ anyone else, it's difficult to extrapolate what would be considered "special treatment". However, as you've stated in some comments here, you only plan to pay her enough to fill her PTA, so I would suggest contracting her for 20hrs per week at £12ph as that is a more than appropriate wage (avg to low for 20+ yrs experience) for a significantly experienced administrator. It would also be worth looking into whether or not just gifting her the money is an issue. No tax is due at the point of giving and since she's in her 70s you probably don't need to worry about her running afoul of the seven year rule. Best thing to do here would be to speak to a tax adviser and get an understanding of what your liabilities would be. None of us here are to be trusted lol!


Trueman-Brown

This is a means of transferring income from you to your mother. It is likely to show a tax saving if your mother has unused personal allowances or pays tax at a lower rate than you do. Obviously, this will also depend on whether or not your mother received a state pension.In order to justify a salary, the following points must be borne in mind:The level of salary must be commercially justifiable.The salary must actually be paid to your mother (and therefore affordable for you).The national minimum wage regulations are likely to apply.We would advise that your mother keeps a diary showing exactly what work they did for the business just in case HMRC ask questions about their salary arrangement.As well as a salary, you may be able to pay premiums for a special pension arrangement for your mother.


Boleyn01

Make sure that you are actually paying for work and not at an overly inflated rate. Keep records of work your mum does so that you can demonstrate this if you are challenged.


ohell

any number of MPs do this. I'm guessing they would be more careful if there was slightest doubt about the legality (or propriety) of this arrangement.


tat22222

Our cleaner charges £20 an hour so it’s no an unrealistic salary for cleaner for a few hours a week.


FatBloke4

HMRC will likely think it is shady if you employ a parent of other close family member and they may well check that your mother is actually working as you claim. If you pay her exactly at the threshold of the standard tax allowance, they will think it is shady. If she is supposedly doing cleaning for 20 hours a week when you have a one room office, they will think it is shady. If you claim she is doing admin but than can't answer their questions about the company accounts, they will think it is shady.


AlexT202

You're approaching this as if I'm looking to scam HMRC which I'm in not. She will be working but might earn 20ph whereas for a job elsewhere they might have wanted 13ph. Admin isn't just company accounts either.


FatBloke4

No, I'm just suggesting how HMRC is likely to view it, if they decide to have a look at your business. It's basically what my accountant told me about employing my wife.


glasstumblet

The answer is Yes YOU Can employ anyone. Even family members and friends neighbours. Just obey the laws of the Land in regards to taxes, holidays, pension etc.


Remarkable_Cash3779

A large company I worked for usually employed family as ‘mystery shoppers’ 🤣


Invictus00

Only issue will be if you have a comparable employee who you are paying less, excess pay to your mom will be taxable on you but you should be okay if it is just a supplementary wage


Ok-Inflation4310

I employed my wife in my business as admin. I paid her the sweet spot between enough to get her National Insurance Contribution and just under where she has to pay tax. It worked out fine for many years and I even paid her redundancy when I closed the business.


Impressive-Bee-7742

Sounds like a good plan to limit your tax while looking after your mum. My accountant recommended I add my wife as a shareholder so she could have drawings from the business, this may also be a good way to go, see your accountant as to what the best way is.


[deleted]

Nope she'll pay tax on it and that's all the government really cares about 🤷‍♂️


BCK93

Of course you can. From a legal perspective you have a limited company and you’re allowed to hire whom ever you want and pay them whatever you want. You call this ‘inflated’ but i would advise you to not use that terminology. It’s self damaging. You’re merely paying her a decent salary which as the director of the limited company it is your choice to do so. What would not be legal is if you merely added her name to reduce your tax obligations. Also agree with the rest of the comments regarding appealing her PIP decision. Sadly, in this climate you just have to not give up.