ltd company "employees"

B

banjo

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I was told by an accountant in a quick consulatation that I could pay my wife as an employee of my potential ltd company ( IT consultancy ) even if she did not really do actual work for the company , e.g. I could always say she did admin work for example.
btw , she would also be a director.
Is this legal and if so , what is to stop me paying my kids or 10 non working mates a small salary to take advantage of 10 very low tax bands and tax rates?
(ok , assuming they give me the money back less a few quid !)
seems too good to be true so im sure theres a catch.
thanks for any advice.
 
Nothing wrong with your proposal, apart from....

a) sounds like you've been speaking with a dodgy accountant...

b) you would be lying to the Revenue..

c) your wife would be lying to the Revenue...

d) your ten friends would be lying to the Revenue...

e) you would be defrauding the Revenue...

Suggest you ask accountant to put his proposal in writing to you (with all the detail included) and then run it by the Revenue for sign-off!

I think you know yourself that his proposal is not legal...

BM
 
It happens all the time . I know several wealthy people who have their wives and children give them their p45s.
One of my friends' dad gave her the tax claimed back (but not the salary) during her time in college ! Even though she was a full time student she still got maybe 250 euro a week into her hand. I dont know about employing your jobless mates but as far as my recent observations go its very possible to pay your immediate family a wage and claim they are earning it by working or contributing to the family business in some way.
Even if its dodgy it must happen a lot.
As far as not really workling goes, if someone can really negotiate a job with such minimal hours or responsibilities then why wouldnt they accept it ? Im sure the wife does provide support to you anyway which frees up time for you to invest in the business so indirectly she would contribute work to the business already in my view.
 
thanks lads , fair enough , I was joking about the ten friends idea!
the wife / family member as employee does seem somewhat more legitimate or at least plausible and I have heard of it being done before.
 
banjo said:
thanks lads , fair enough , I was joking about the ten friends idea!
the wife / family member as employee does seem somewhat more legitimate or at least plausible and I have heard of it being done before.
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Using the wife is just good tax planning, she will have no paye tax credit.

The kids are fine if you want to share the money around, if you are giving
them large sums and getting them to give you the cash back you could
run into problems, they will have no paye tax credit also.
 
As stated above, all will be OK if in fact the individuals actually do some work......... otherwise it is dodgy!!!
 
this is not something new and goes on all the time to take advantage of extra tax bands etc. Its not dogey at all. Also, there is no Employers PRSI to be paid for family members as they are classes at class M.
 
As other posters have pointed out making your wife an employee is pretty common and acceptable, especially as she will be a director...that's all the accountant advised to do so he's not "dodgy"
The OP's additional suggestions regarding children and friends are ill advised and should only be joked about!
 
Following up on what contemporary said - be very careful messing with your wifes PRSI record as well. If she is a director (and assuming she is a 50% shareholder) she would pay PRSI under class S. This would affect her ability to claim State Pension (Contributory), Disability Benefit, Job Seekers Benefit and Illness Benefit.

This may not be important now, but I have come across a number of people who have had ample time to regret short-cuts taken with their social insurance record on reduced benefits later in life.
 
Niall M said:
this is not something new and goes on all the time to take advantage of extra tax bands etc. Its not dogey at all. Also, there is no Employers PRSI to be paid for family members as they are classes at class M.
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..."not dodgy at all".

What is being proposed here is that the main director creates an 'imaginery' employee and collects their salary for themselves to avoid paying higher tax rates.

Sounds very dodgy to me.
 
Niall M said:
this is not something new and goes on all the time to take advantage of extra tax bands etc. Its not dogey at all. Also, there is no Employers PRSI to be paid for family members as they are classes at class M.
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Surely this is not true I looked up social welfare website and they say this is only available to Sole Traders I have a limited company and would like my business student son to help me out part time so does this mean I have to pay PRSI for him.
 
There is nothing inherently illegal in a company paying a salary or fees to a director, once they are working for, or contributing their expertise to, the company and its business.

what is to stop me paying my kids or 10 non working mates a small salary to take advantage of 10 very low tax bands and tax rates?
(ok , assuming they give me the money back less a few quid !)
seems too good to be true so im sure theres a catch.
thanks for any advice.
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You really should have asked your accountant that question. The answer is that there is nothing to stop you doing this. However if you try to be "too smart" in the manner in which you comply with Revenue & tax requirements, they are likely to notice this and possibly subject your arrangements to special scrutiny. You could well face tax, interest and penalty bills if they invoke anti-tax avoidance legislation to disallow any tax savings you might have made.
 
Does anybody know what the situation is with PRSI when a director of a LTD Company employs his son on a parttime basis. Does the company have to pay PRSI for this employee even though the son will be earning below the treshold where he will have to pay PRSI himself
 
This is perfectly legitimate!! The reason this works is that, as long as your wife is not working elsewhere and using her tax free allowances in other employment, she has 25K per annum (or thereabouts, cant remember 2007 figure) that she can earn at 20% that is not transferrable to you. I'm presuming that if you are the only one working, you have all the other allowances. If your income extends into the 42% bracket then this is when you pay your wife the portion of your income above that. She pays tax at 20% rather than you at 42%. Its all perfectly legal and above board. Your wife is a director of the company and as such can be paid for making the tea if necessary! You can't employ your kids (until a certain age anyway) and your mates have nothing to do with it. Get a copy of Family finance or one of those from the library and have a look. If your accountant doesn't suggest this, I'd get another accountant.....
 
I can see how this would work if you're married... i.e. you pay your wife a salary of €34k for making tea/typing letters/calling clients etc and then whatever money she makes eventually goes toward paying for family bills anyway.

However, this is different to what I was talking about. I am the MD of my own company, and my mother is the 2nd director, but purely for legal reasons, she has no say in the co. and does not provide anything towards it, work-wise, or monetary. Surely I can not pay her a salary and then ask her to give me back the money so I can avoid paying 41% on it?
 
ButtermilkJa said:
Surely I can not pay her a salary and then ask her to give me back the money so I can avoid paying 41% on it?
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No, but if you wanted to help your mother out financially and you could find a couple of jobs for her to do, it would be a very tax efficient way of doing so.
 
Nige said:
No, but if you wanted to help your mother out financially and you could find a couple of jobs for her to do, it would be a very tax efficient way of doing so.
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Yes, definitely, which is something that I may do in the future, but some of the posts above are suggesting it's prefectly fine to 'pretend' your spouse is working in order to avoid/evade? tax.
 
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