Company Law & Taxation Law
29 July 2003, 10:44 PM
#1
<can of worms opened>
My wife is gainfully employed & likely to stay that way (so its not me/mine
)
BUT
If a person's partner/wife/husband was not working and that person had a job which brought them over the 40% bracket by quite a margin, what would be the case for both that person and the company for whom he/she was employed for the evasion of tax, if they used their partner/wife/husband's tax allowance + the lower rate applicable to defraud the treasury?
Less interested in the minnow's postion, more the position that the company could find itself in for agreeing to the fraud...
<can of worms shut but not screwed down>
[Edited by Puff The Magic Wagon! - 7/29/2003 10:45:06 PM]
My wife is gainfully employed & likely to stay that way (so its not me/mine
)BUT
If a person's partner/wife/husband was not working and that person had a job which brought them over the 40% bracket by quite a margin, what would be the case for both that person and the company for whom he/she was employed for the evasion of tax, if they used their partner/wife/husband's tax allowance + the lower rate applicable to defraud the treasury?
Less interested in the minnow's postion, more the position that the company could find itself in for agreeing to the fraud...
<can of worms shut but not screwed down>
[Edited by Puff The Magic Wagon! - 7/29/2003 10:45:06 PM]
29 July 2003, 10:50 PM
#2
Track Day Organiser
The revenue have been trying to stamp this one out for years
The typical example being small/medium sized firms had directors spouses on the books but did nothing
Some companies get away by claiming that the spouse acts as a PA
Dodgy ground though
I think you must work for the remuneration
I stand to be corrected
Phil
The typical example being small/medium sized firms had directors spouses on the books but did nothing
Some companies get away by claiming that the spouse acts as a PA
Dodgy ground though
I think you must work for the remuneration
I stand to be corrected
Phil
30 July 2003, 08:31 AM
#5
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Not too sure what the exact legal position is, but this is very commonly done and in the end of the day, the revenue would have to prove that the spouse did nothing to deserve payment. I mean, if I decide I want to pay someone 20k a year to wash and iron my shirts, who is going to tell me that it's illegal?
30 July 2003, 08:35 AM
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Happens all the time.
I'm not being sexist in the use of Husband and Wife in this example, its just the way it is 99% of the time.
Husband is director and wife is "an employee" as far as PAYE is concerned. Wife gets a proportion of husbands earnings to reduce the tax liability the husband would be suffering if he was receiving the full amount.
Now, as for the law, its a gray area.
If you are a director of a Ltd co, you can pay who you want, what you want regardless of how much work they do, or don't do. As long as their income is properly recorded.
The revenue would have to prove "intend to evade tax" to be successful. V difficult to do.
Notwithstanding that many wifes do nothing at all as an "employee" it wouldn't be difficult to establish that they were worth whatever they were getting paid - admin/pa/sounding board/consultant/advisor etc.
Where it gets easier for the revenue is where wife is getting paid, say £29,000 to avoid the husband paying 40% tax on that.
As for the penalties, anything from jail for tax evasion (very , very rare) to the husband (in my example) having to pay the tax he has evaded, plus interest and penalties (which can be frighteningly high)
Its common sense really.
paying the non working party say £10k is unlikely to be a problem, but having your wife do the filing for £29k p.a. is taking the pi55.
It is unlikely the company itself (as a legal entity in its own right) would be penalised, but the directors thereof personally and the party who had saved on the tax.
D
[Edited by Diablo - 7/30/2003 8:39:09 AM]
I'm not being sexist in the use of Husband and Wife in this example, its just the way it is 99% of the time.
Husband is director and wife is "an employee" as far as PAYE is concerned. Wife gets a proportion of husbands earnings to reduce the tax liability the husband would be suffering if he was receiving the full amount.
Now, as for the law, its a gray area.
If you are a director of a Ltd co, you can pay who you want, what you want regardless of how much work they do, or don't do. As long as their income is properly recorded.
The revenue would have to prove "intend to evade tax" to be successful. V difficult to do.
Notwithstanding that many wifes do nothing at all as an "employee" it wouldn't be difficult to establish that they were worth whatever they were getting paid - admin/pa/sounding board/consultant/advisor etc.
Where it gets easier for the revenue is where wife is getting paid, say £29,000 to avoid the husband paying 40% tax on that.
As for the penalties, anything from jail for tax evasion (very , very rare) to the husband (in my example) having to pay the tax he has evaded, plus interest and penalties (which can be frighteningly high)
Its common sense really.
paying the non working party say £10k is unlikely to be a problem, but having your wife do the filing for £29k p.a. is taking the pi55.
It is unlikely the company itself (as a legal entity in its own right) would be penalised, but the directors thereof personally and the party who had saved on the tax.
D
[Edited by Diablo - 7/30/2003 8:39:09 AM]
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30 July 2003, 12:39 PM
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jlanng - i hope they do not. it would be:
a) a waste of time and effort
and
b)unfair
I mean, if I earn £70k and i can therefore afford for my wife to stay at home and look after the kids (thereby enabling me to carry on with my employment full time), why should I pay more tax than if we both worked in jobs paying 35k a year each? In a husband/wife situation I do not see why one should not be able to benefit from the tax allowance of the other.
a) a waste of time and effort
and
b)unfair
I mean, if I earn £70k and i can therefore afford for my wife to stay at home and look after the kids (thereby enabling me to carry on with my employment full time), why should I pay more tax than if we both worked in jobs paying 35k a year each? In a husband/wife situation I do not see why one should not be able to benefit from the tax allowance of the other.
30 July 2003, 01:23 PM
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ProperCharlie - I totally agree. The system is extremely unfair, and wasn't properly sorted out when the married person's allowance was removed. The original idea of that was to sort this out, but I guess the government felt peeved that in modern society a lot of married women (apologies for the sexism, but it's largely true) still worked, whereas in the 50's married women generally stayed at home. Now there just giving family tax credits for low/medium earners with kids, which doesn't really help company directors!
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