Paying Spouse wage and taxation implications

[practitioner]

I pay tax at the top rate.My wife stays at home to mind our family.I am self employed and would need my wife to do various secretarial work to help me.Is it in my interest to pay a salary and thereby claim it as a business expense and in return claim tax relief on same or would we work out less well in view of our joint assessment position and our overall income would be up in view of salary paid to my wife?
Furthermore, if I do pay my wife a salary,how do I go about paying PRSI contributions to maintain her class A prsi as She is currently on homemakers credit until resumimg work?
Also, in view of us being 21 weeks pregnant, if I restart contrib etc for her, would we be able to get maternity benefit?
I would appreciate any advice re above.

 

[Graham_07]

If you have income in excess of €43,000 and if she genuinly works for you then you can pay her up to €25,000 in 2007 and her pay only 20% on this income, instead of the 41% you'd pay. There is therefore still a saving of 21%. You'd need to register as an employer ( if not already registered) and get a cert of tax credits for her.

She is not entitled to the PAYE credit working for you.

She is not insurable working for you so the A rate is irrelevant.

Others may have additional comments on this.

 

[Joe1234]

Can it be put down as non paye income, thus eliminating the need for registering as an employer?

 

[Graham_07]

Can it be put down as non paye income, thus eliminating the need for registering as an employer?

I have encountered some instances of the wife being self-employed as a bookkeeper etc. and filing the income on a self-assessment basis and in that instance paying Class S PRSI for pension benefits. It probably depends on the industry the main self-employed spouse is working in. If this were construction for example, then would the wife be a sub-contractor to him in which case if she were exclusively working for him then sub-contractor legislation would demand she be treated as an employee anyway. I have not yet encountered any such spouse working for spouse being tested or queried by Revenue audit.

 

[xxx]

As a sole trader paying your wife she would be regarded as class m Prsi (same as any children that you may have under 16). There is no liability to PRSI at class m. You should register as employer though

 

[practitioner]

I work as a GP and my wife would help re telephone, messages, keeping records re expenses, wages etc.Does this change things re PRSI?
Would we be entitled to claim maternity benefit or should I just contact social welfare.Pardon me, I do appreciate I earn a good wage but feel it is a kick in the teeth where with one spouse working, one pays a lot more tax than if two people are working.I feel one working parent families just get penalised for being at home with children and doing some work to help out self-employed spouse.Furthermore, I feel if I can pay PRSI contibutions for my wife, then with her having paid PRSI class A and on hold as it were with homecarers credit and no gap in contrib as She is on this credit, then if I started paying prsi (? which class to maintain benefits like maternity), would we be entitled to this benefit.
I am sorry if I seem to come across as 'greedy', but i feel people should be able to claim the benfeits if entitled to same,I appreciate I may just have to contact social welfare office,thanks for comments.

 

[Graham_07]

I work as a GP and my wife would help re telephone, messages, keeping records re expenses, wages etc.Does this change things re PRSI?

No, as said before your spouse is not insurable in an employment with you if she is an employee. She would be Class M. If she worked as a self-employed bookkeeper or such then she would be paying Class S PRSI for Contrib OAP. What type of work she does has no bearing on the PRSI situation.

Would we be entitled to claim maternity benefit or should I just contact social welfare.

If she satisfied the conditions re PRSI contributions then she would qualify for MB. You cannot qualify for MB on Class M or Class S. But if she had sufficient Class A contributions then she would. If in doubt contact www.welfare.ie

Pardon me, I do appreciate I earn a good wage but feel it is a kick in the teeth where with one spouse working, one pays a lot more tax than if two people are working.

Blame Charlie McCreevey. Individualisation was his baby. The idea was to get more spouses back into the workforce. It largely worked. It also gave rise to the possiblity of self-employed people employing spouses as you are suggesting and saving tax that way. So if she works for you either as an employee or as a self-employed contractor then you will benefit from individualisation.

I feel one working parent families just get penalised for being at home with children and doing some work to help out self-employed spouse.

If the stay at home spouse does not help out and if the family is classes as one income then with children you do get the benefit of the home carer credit. At €770 this hasn't been changed since introduction and does need to be brought up to date.

Furthermore, I feel if I can pay PRSI contibutions for my wife, then with her having paid PRSI class A and on hold as it were with homecarers credit and no gap in contrib as She is on this credit, then if I started paying prsi (? which class to maintain benefits like maternity), would we be entitled to this benefit.

Check with records/contributions section or the relevant benefit section in DSFA to see if there is anything she can do to maintain her benefit position.

I am sorry if I seem to come across as 'greedy', but i feel people should be able to claim the benfeits if entitled to same,I appreciate I may just have to contact social welfare office,thanks for comments

We are all entitled to ensure that we get the best from the system into which we are paying whether on minimum wage or chief executive salary. If you are entitled to something, claim it.

 

[laragh]

your spouse is not insurable in an employment with you if she is an employee. She would be Class M. If she worked as a self-employed bookkeeper or such then she would be paying Class S PRSI

Does it follow from this statement that in most cases it would be better to have your wife set up as being self-employed and then her husband can sub-contract out work to her. This would save him having to register as an employer and she would be able to make her PRSI contributions thus leaving her entitled to welfare benefits. Is there some catch in this?

 

[ubiquitous]

Does it follow from this statement that in most cases it would be better to have your wife set up as being self-employed and then her husband can sub-contract out work to her. This would save him having to register as an employer and she would be able to make her PRSI contributions thus leaving her entitled to welfare benefits. Is there some catch in this?

The biggest "catch" is the possibility of the Revenue refusing to accept this as a genuine self-employment scenario.

 

[Graham_07]

Does it follow from this statement that in most cases it would be better to have your wife set up as being self-employed and then her husband can sub-contract out work to her. This would save him having to register as an employer and she would be able to make her PRSI contributions thus leaving her entitled to welfare benefits. Is there some catch in this?

The main problem is the definition of a self-employment. Revenue have been known, in certain cases, to insist that a person be classed as an employee where the overall terms/conditions/circumstances would suggest that it's not a genuine self-employment. The following Revenue leaflet gives more information.

[broken link removed]

 

[Joe1234]

You cannot qualify for MB on Class M or Class S.

According to http://www.welfare.ie/topics/prsi/prsiclasses.html those on class S do qualify for MB.

 

[Graham_07]

According to http://www.welfare.ie/topics/prsi/prsiclasses.html those on class S do qualify for MB.

Apologies, that was news to me as I understood that Class S was pension only. Good news there so.

 

[Hummingbird1]

This is an old thread that I dug out before asking a similar question as I am in a similar situation to "practioner". Would I be correct in concluding that one good route is to set up a partnership instead of sole trader, with husband and wife sharing in the business and then both paying S prsi contribution and also getting some advantage regarding income tax (individualisation). Is this somewhat better than the spouse employment situation where prsi contributions cannot be continued or spouse self-employment where revenue may not believe that this is real.

 

[headache]

The partnership idea could work and would qualify your wife for Class S contributions which would contribute to MB and contributory pension. I'm class S and have been able to claim MB in the past. Not that you'd live on it mind you.

It might be possible to form a limited company. I know a consultant who went down that route. It is more tax efficient and he has his SSAP, etc and his wife is a director. Again this would give your wife a class S contribution. However, she could be a non-proprietary director and you could 'stamp her card' (love that expression) at Class A.

Alternatively, it may be possible to make a voluntary contribution in respect of PRSI to maintain credits subject to certain conditions. And their is also the Homemaker's Scheme which safeguards a mother's prsi credit too. DSCFA will be able to help with your queries. Although, I'm reasonably sure that a 'homemaker' can make application for pensions, etc based on their husbands social insurance record. Anyone know that for sure.

That's my tuppence hapenny!!