Hi there, A friend of mine has asked me to do her partners bookkeeping and complete his tax return. She has asked as she does not work, can she work as an employee for him so that he can get 2 peoples personal allowances for the year? I have told her yes as I know that alot of people do this, the problem is how do I do this please? does my friend need to register as self-employed as maybey his secretary? or does it need to be a partnership?
Also as the bookeeping I will be doing is for the 2009/2010 tax year, is it to late to do this for that year?.
First of all unless your friends partner actually employers her and registers as an employer with HMRC she cannot effectively be on the books as a "secretary" as self employed as I doubt whether she would meet any of the criteria for being self employed ie. PI Insurance,Other Clients etc. There is a guide on the HMRC website which helps employers define whether their workers have to be employed. It has to be said that HMRC will also not tolerate excessive wages being paid to spouses/partners and proof of working hours etc. can be requested and investigated. Her partner could make his business a partnership with her, she would then share the profits or losses of the business and pay tax and NICs (Class 2 compulsory and Class 4 on profits over a certain level) and they would fill out a partnership tax forms along with their normal Self Assessments for their share of the business.
The tax returns for 2009/2010 are due to be filed online at HMRC by 31 January 2011 and any outstanding tax paid by this date.
Hope this helps.
Sue
-- Edited by Sue T on Wednesday 5th of January 2011 11:58:46 PM
Hi there, A friend of mine has asked me to do her partners bookkeeping and complete his tax return. She has asked as she does not work, can she work as an employee for him so that he can get 2 peoples personal allowances for the year? I have told her yes as I know that alot of people do this, the problem is how do I do this please? does my friend need to register as self-employed as maybey his secretary? or does it need to be a partnership?
Also as the bookeeping I will be doing is for the 2009/2010 tax year, is it to late to do this for that year?.
Thank you very much in advance for your help
Rachel
It is too late to do if for the 2009/10 tax year; however, there is scope to do it in the future. There are a couple of other issues to consider
Is it a Limited Company? I am presuming a sole trader given your info but this could make a difference.
Does she claim benefits? She would likely lose these.
As above for tax credits
Minimum wage etc. if employed and not a director.
Do they have other income sources that could affect it
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I think the point that Phil is making is nothing was done during the year, and now it is too late. Essentially, going back and changing the books is fraud.
What your friend should have done was actually plan for it and paid herself a salary from his business for the (genuine) work that she did. Or an alternative would be to change the business from a sole trader to a partnership. Both of these can be done from now.
This emphasis the importance of tax planning - if a wage was paid for work done in the business, the potential tax saving could be £5,712 x 28% = £1,599.36
