IT Contractor, adding 18 year old son to company as paye

Hi, myself and other half own a small IT company, I'm the main and currently only earner , this is unlikely to change anytime soon, we have one client at present but are well compensated, other half is the company secretary and a director in the company.

Thinking about adding our son to start with socials for us, never did but might allow us to expand in the future.
We will likely pay him a small amount of a few 100s per month for a few hours a week (minimum wage for 18 years old).

Leaving professional advice aside(forthcoming), I'm looking to hear from someone with similar experience/dilemma.

You might struggle to explain why a firm with exactly one customer needs a social media manager.

The Revenue would see through straight away assuming that the 18 year old isn't doing the work. If the work is genunine then it should be possible to prove it. The approach I suggest on such matters is whether the 18 year old would be able to convince the Tax Appeal Commissioner on examination and cross examination that they carried out the tasks of employment. The Revenue have taken and won cases on this type of issue previously where the family employee was only there to use up their tax credits.

dublin67 said:

The approach I suggest on such matters is whether the 18 year old would be able to convince the Tax Appeal Commissioner on examination and cross examination that they carried out the tasks of employment.

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Is there any conceivable scenario where an employee could be compelled to appear as a witness at a Tax Appeal Commission hearing in relation to a tax dispute between their employer and the Revenue Commissioners, or where a negative inference could be made in regard to the employer's tax position, on foot of a refusal by the employee to appear?

T McGibney said:

s there any conceivable scenario where an employee could be compelled to appear as a witness at a Tax Appeal Commission hearing in relation to a tax dispute between their employer and the Revenue Commissioners, or where a negative inference could be made in regard to the employer's tax position, on foot of a refusal by the employee to appear?

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It is a very useful thought exercise.
There is at least one case where a medical consultant was challenged by revenue on payments to adult sons for work allegedly done for company. Company lost, I think.
In reality, it would be up to the employer to prove that the work was done, by pointing to work product, work emails, benefit etc, if "employee" was not available as a witness.

I wouldn't do it OP. Very little upside and the risk of a flag going off in Revenue.
Ditto for your other half, if you are the main earner (it looks like you're a one-man-show IT contractor set up via a company), I wouldn't be drawing 2 salaries for the same reason.

Firefly said:

Ditto for your other half, if you are the main earner (it looks like you're a one-man-show IT contractor set up via a company), I wouldn't be drawing 2 salaries for the same reason.

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For a small salary I don't see an issue with the partner being paid for director/ secretary services, but we aren't talking 20 or 30k here!
Most rulings I've seen are based on Revenue declaring that the spouse did 1/2 day a week at little more than min wage. They can then add a nominal amount to this (maybe 2k/year) and consider that the income attributable to the spouse.

Cheers all, consensus here seems to be that it isn't worth the hassle.
Appreciate your time taken

T McGibney said:

Is there any conceivable scenario where an employee could be compelled to appear as a witness at a Tax Appeal Commission hearing in relation to a tax dispute between their employer and the Revenue Commissioners, or where a negative inference could be made in regard to the employer's tax position, on foot of a refusal by the employee to appear?

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Unless I'm raving, I'm sure I can remember an appeal case involving a child of school going age, employed on the family farm, giving evidence in an appeal regarding wages paid to family members... could be nearly ten years ago now (or maybe an urban legend that's calcified in my brain!).

In any event, Section 949AE TCA 1997 refers:

Summoning and examination of witnesses.

(1)The Appeal Commissioners may summon any person to appear before them to be examined where they consider such a person to be in a position to give evidence relating to a matter under appeal.

(2)A summons under subsection (1) shall—

(a)unless the person being summoned consents to a shorter period, be sent to that person not less than 21 days before the date of a hearing,

(b)inform the person being summoned of his or her entitlement to apply to the Appeal Commissioners to vary or set aside the summons if he or she did not have an opportunity to object to it before it was issued, and

(c)state the consequences, under section 949AU, of failure to comply with the summons.

(3)The Appeal Commissioners may limit the number of witnesses whose evidence a party may put forward.

torblednam said:

can remember an appeal case involving a child of school going age, employed on the family farm, giving evidence in an appeal regarding wages paid to family members... could be nearly ten years ago now (or maybe an urban legend that's calcified in my brain!).

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Thanks. My question was whether an employee could be dragged into such a case in relation to another taxpayer's taxation affairs without their agreement.

torblednam said:

In any event, Section 949AE TCA 1997 refers

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This is a procedural provision.

It is procedural, but it does confer a power to summons a witness. And the summons is, in general, legally enforceable; s. 949AU imposes a penalty of up to €3,000 for non-compliance.

So, in general, the Appeal Commissioners can issue legally binding summonses requiring witnesses (who need not be the taxpayer) to attend, and be examined, at a tax appeal. Summonses aren't issued routinely; someone (in this case, the Revenue official running the case) would have to to apply for one. But, if it works like it works in the courts, a summons can generally be had for the asking.

Having said that, I don't know what the Revenue policy/;practice would be in relation to the summoning of witnesses. In a case like this, I think they'd take the view that it's up to the employer, not the employee, to demonstrate the reality and substance of the employment. (Of course, the employer could choose to summons the employee, if the employer thought the employee's evidence would be helpful to its position.)

TomEdison said:

In a case like this, I think they'd take the view that it's up to the employer, not the employee, to demonstrate the reality and substance of the employment

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Likewise, which was my point all along.

My emphasis was not particulary whether there was the legal capacity for an employee to be questioned before the Tax Appeal Commission. The onus is on the taxpayer (i.e. the company) to prove that the salary deduction was for the benefit of the trade using the ususal rules (wholly & exclusively etc). My emphasis was whether the employer can show that the 18 year old carried out the tasks he/she was employed for. The taxpayer wants the strongest case to demonstrate their position and this may be how it is done. You could also have the director give evidence. Conor Kennedy, a former appeal commissioner, has written & lectured recently on the requirement for evidence in TAC cases. He used the example of board minutes but was the board meeting held. It only takes a few questions from a Revenue official, or their barrister, to show that board meetings were not held (if that was the case). One then in a situation of running backwards and rapidly losing. The tax appeal system, since it was restructured in 2015/6 or thereabouts, is very legally based. Conor's articles in the Irish Tax Review are worth reading for anyone who advises on transactions involving tax - not massivley relevant for compliance services.

Firefly said:

Very little upside and the risk of a flag going off in Revenue.

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This really is the point. And it applies to other stuff as well. People do funny things as part of tax planning. It potentially saves them a few pennies but risks a lot more.

There was a great case a few years ago where a solicitor employed his girlfriend/partner and I think it was a tax planning exercise rather than a full employment, but I might not recall correctly. When the solicitor met someone else and terminated the relationship and employment of the girlfriend, she sued for wrongful dismissal. I think that the solicitor was caught between arguing that she wasn't really an employee and not having to pay her an award for unfair dismissal but then facing a Revenue chat.

Brendan Burgess said:

There was a great case a few years ago where a solicitor employed his girlfriend/partner and I think it was a tax planning exercise rather than a full employment, but I might not recall correctly.

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Donnelly v Mannion?

Thanks ClubMan



UNFAIR DISMISSALS ACTS, 1977 TO 2001
I certify that the Tribunal
(Division of Tribunal)
heard this claim at Dublin on 14th February and 12th June 2007

Facts: The claimant and the respondent solicitor were in a relationship. The respondent suggested that the claimant be on the books of the respondent so as to pay PRSI for the claimant. The respondent denied having dismissed the claimant when she discovered he was in a relationship with another employee. The claimant visited the office from time to time but had no duties there.
Held by the EAT (by a majority) that the evidence of the claimant was unconvincing. The claimant was not employed by the respondent under a contract of service and the Tribunal thus lacked jurisdiction.

Think she also got a chunk of the house - by virtue of having cohabited - under a separate action from the workplace issue.

For a small salary I don't see an issue with the partner being paid for director/ secretary services, but we aren't talking 20 or 30k here!
Most rulings I've seen are based on Revenue declaring that the spouse did 1/2 day a week at little more than min wage. They can then add a nominal amount to this (maybe 2k/year) and consider that the income attributable to the spouse.


Are the Revenue likely to challenge a payment to a director/company secretary of €20k? Seems like a very modest number to cause a "flag"?

JamesBM said:

Are the Revenue likely to challenge a payment to a director/company secretary of €20k?

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I think the consensus on this question is "quite possibly yes."

If Revenue were to decide this, what would be the remedy? Some or all of the amount would be disregarded as a deduction in the computation of CT? Would there be any implication for the director receiving the payment?