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

JamesBM said:
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?
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They usually want it treated and taxed as income in the hands of the income-generating director.

Wild west stuff.
 
What does you son want to do at 18, is he doing the leaving, going to college or what. ?

It might be worth seeing if you could take him on as an apprentice. For example, there are tech apprenticeships for registered apprentice companies where he works 2 to 3 days a week and gains a qualification the rest of the time. There is even a digital marketing apprenticship


Not sure what the rules are around all of this but could be worth having a look at
 
JamesBM said:
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?
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As I understand it, the revenue position on this is:
  • the payment made to the employee is taxable as their income (because it really is income to them) but
  • it's not deductible for the employer (because it's not incurred wholly and exclusively for the purposes of the employer's trade).
There's an analogy with the situation if you e.g. employ someone to clean your house. Whatever you pay them is income to them, and taxable accordingly, but it's not deductible for you because it's not incurred wholly and exclusively for the purposes of your trade (and you're probably even not carrying on a trade anyway).

Might be different if the "employee" does nothing at all in return for the payment. Revenue might then argue that the payment is a distribution to you, the owner/shareholder/director, and so taxable as income to you, followed by a gift from you to the "employee", potentially attracting CAT, if the small gift exemption/relevant class threshhold didn't cover it.
 
TomEdison said:
As I understand it, the revenue position on this is:
  • the payment made to the employee is taxable as their income (because it really is income to them) but
  • it's not deductible for the employer (because it's not incurred wholly and exclusively for the purposes of the employer's trade).
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If that relatively benign treatment was commonplace, we'd be encouraging family companies to hire student children to complete paid work assignments as such experience is invaluable to young people and in financial terms even the full loss of the 12.5% CT deduction wouldn't be that significant.

But Revenue are regularly and perhaps usually far more aggressive than that.
 
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Thanks both, seems like an interesting topic. If it was a spouse rather than a child would Revenue's stance reflect the relative "fungibility" of spousal assets? I understand of course that payments to a spouse of this type could confer a tax advantage.
 
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