# Loss of PAYE tax credits for wife of Proprietary Director



## z103 (19 Feb 2009)

I phoned the revenue for them to Update my wife's tax credits to include PAYE tax credits. They informed me that she wouldn't now be entitled to these credits because she is now married to the director of the company she works for. I was pretty shocked to hear this, so I did a bit more research and found this:
http://www.revenue.ie/en/tax/it/credits/paye-employee-credit.html

It just doesn't sound correct to me. Are revenue now discriminating against people because of their marital status?

To be clear, my wife does a full 40 hour week and gets paid full wages from a limited company. I am a proprietary director of this company.

Can anyone confirm that she is not entitled to PAYE tax credits?


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## Ham Slicer (19 Feb 2009)

I can confirm that unfortunately she is not entitled to it.


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## z103 (19 Feb 2009)

Thank you for confirming that Hamslicer.
Not the answer I wanted to hear.

It does not sound right that the revenue can discriminate against someone soley on the basis of who they choose to marry. If we didn't marry, we would be far better off financially.

I am not going to let this rest. Any ideas how the government punishes those it deems to have defaulted?
I'm furious and am considering the following;
1. Simply not paying.
2. Moving country.
3. Just giving up and joining the dole queue.


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## z103 (19 Feb 2009)

Just read this:

"Married couples have a constitutional right to be taxed no more harshly than two single individuals would be. That was the ruling of the Supreme Court back in 1980 - it still stands"

_Source:Family Finance 2005; Author, Colm Rapple; Page 288_


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## mathepac (19 Feb 2009)

Would I be right in thinking that your case to the Revenue would be that the loss of your wife's PAYE tax-credit is solely on the basis that she married a / the proprietary director of her employer's company?

Is your wife also listed as a director of the company?


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## z103 (19 Feb 2009)

Yes, mathepac.
Prior to our marriage my wife would be entitled to PAYE tax credit. Now she is not.
She is not a director of any company.


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## aetius (19 Feb 2009)

If she worked elsewhere she'd be entitled to the credits - you could challange it in the courts on the grounds of discrimination (and lose); yuour choice. 

If you weren't a proprietary director - she'd be entitled to the credit. What otherwise would there be to stop you  reducing your own salary and increasing hers to take advantage of her credits ?

Of the options you present, I advise you leave the country.


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## Eblanoid (19 Feb 2009)

Pay your taxes under the current system, but see if you can get help to take a legal case against Revenue. I imagine there'd be groups out there that would support you in such a case.


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## z103 (19 Feb 2009)

> If you weren't a proprietary director - she'd be entitled to the credit. What otherwise would there be to stop you reducing your own salary and increasing hers to take advantage of her credits ?


Isn't this the whole idea of joint assessment (assigning tax credits accordingly)



> Pay your taxes under the current system, but see if you can get help to take a legal case against Revenue. I imagine there'd be groups out there that would support you in such a case.


Anyone out there want to support my case?


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## Graham_07 (19 Feb 2009)

Spouses working for their sole trader partners are not allowed the PAYE credit either. The effect of this is some €9,180 ( tax credit of €1,830 x the std rate ) of income being taxed which otherwise would not, even though the wife is on PAYE with their husband ( or v.v. ) The employee credit was ( I believe) originally intended to compensate employees for being taxed regularly (weekly/monthly) unlike self-employed persons who have the "luxury" of paying only once a year.


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## z103 (19 Feb 2009)

This truly is shocking. Both of us are PAYE employees, on not that much money to start with.

Any solicitors know how I would go about a legal challenge? Is this incredibly expensive or would I be entitled legal aid?


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## mathepac (19 Feb 2009)

leghorn said:


> ... Anyone out there want to support my case?


 I'll be shouting for you both from the sidelines if that's any good.  

The circumstances you describe certainly sound discriminatory; jointly you are financially worse off than as singletons.

But I don't envy you if you take them on - Revenue, barristers, courts, possible appeals, years - ouch. Unless a few other AAMers in similar circumstances were to join with you, its gonna get lonely and expensive out there .


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## deadlyduck (19 Feb 2009)

I am not sure of the validity of the following- caveat emptor:

Could your wife set herself up as a self-employed consultant (a sole trader, not a limited company) and charge a fee to your limited company for the work she undertakes? This wouldn't entitle her to the Employee tax credit but she may be able to reduce the gross 'consultancy fees' by c. €9150 expenses [travel/stationery etc]. This would ensure that she effectively benefits by the value of the tax credit as she'd only pay tax on the gross amount less expenses. There may be issues with VAT if the fees exceed the VAT threshold for services (approx €37500) and also withholding tax/ cash flow implications/ third party returns by your company re fees paid to her etc so any decision to go with this needs to be professionally evaluated.

As I said: Caveat emptor...get advice about this!


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## z103 (19 Feb 2009)

Thanks for the suggestion Deadlyduck.
A couple of points:

1. Why should she have to try to circumvent the system like this? (we try to do everything above board - maybe this is our mistake!)

2. Would the revenue not see through this rouse?
She also legitimately incurs expenses anyway (travel etc) so I'm not sure how this arrangement would be to our advantage.


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## mathepac (19 Feb 2009)

deadlyduck said:


> ... Could your wife set herself up as a self-employed consultant ...


Either I have missed the point of the thread or you have.

I thought this about about losing PAYE tax-credits due to marriage *not *about finding a possibly dubious and financially circuitous route around the loss.


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## deadlyduck (19 Feb 2009)

I accept that my suggestion is an attempt to avoid the loss and that the principle at issue here- the discriminatory nature of the proprietary directorship rule- is open to challenge. However, you could consider it as a (possible) immediate term fix to your financial loss. 

As a means of mitigating the loss, my idea may/ may not work. If (and it is an "if")- having researched the possibility- the idea is deemed acceptable and permissible from a tax planning view [I'm not condoning tax evasion- this suggestion would be tax avoidance which is legal though open to abuse] then it would be open to you to decide whether or not to run with it.

However, your main point- that the rule is discriminatory and open to challenge- absolutely stands. My idea is a 'possible quick fix' whereas your challenge- if successful- would be a superior permanent and transparent fix.


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## Eblanoid (19 Feb 2009)

deadlyduck said:


> Could your wife set herself up as a self-employed consultant (a sole trader, not a limited company) and


A Sole Trader with only 1 client (in this case her husband's company) can be deemed to be an employee of that pseudo-client (her husband's company) by Revenue.  This would apply even if the company was not related to her husband.

See "Code of Practice for Determining Employment or self-Employment Status of Individuals":
http://www.revenue.ie/en/tax/it/leaflets/code-of-practice-on-employment-status.pdf


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## contemporary (19 Feb 2009)

leghorn said:


> This truly is shocking. Both of us are PAYE employees, on not that much money to start with.
> 
> Any solicitors know how I would go about a legal challenge? Is this incredibly expensive or would I be entitled legal aid?



It would be cheaper to get a divorce and give her back her credits than it would to take on the revenue, the rev know that no one is going to challenge them for the sake of 1800 odd a year


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## z103 (19 Feb 2009)

> It would be cheaper to get a divorce and give her back her credits than it would to take on the revenue, the rev know that no one is going to challenge them for the sake of 1800 odd a year


Maybe one single person might not challenge them. I intend gathering support. This must impact quite a few people across the country.
If anyone would like to help, please post here (or PM me)

(PS. For me, 1830 is a huge chunk of money.)


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## Eblanoid (19 Feb 2009)

Eblanoid said:


> I imagine there'd be groups out there that would support you in such a case.



When I said groups, I meant existing groups. I'm sure there are political parties or pro-equality, pro-family groups that would be interested in this anomaly.

Sheesh - if you can get money for being told to get your hair cut...
[broken link removed]


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## z103 (19 Feb 2009)

I just read that article about an hour ago!
They used www.[B]equalitytribunal[/B].ie to resolve their case.
It looks promising from what I've seen on the website.


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## askalot (19 Feb 2009)

leghorn said:


> Isn't this the whole idea of joint assessment (assigning tax credits accordingly)



The PAYE tax credit is not assignable in any case but the personal tax credit is transferable.

Most company directors that I know never have any problem claiming way more than 1830 a year in various 'expenses' and 'travel' (just like our TDs!) even at the same time as they are freezing their employees pay. So I assume this rule is to prevent what would be an open invitation for tax evasion.

You could make your wife a proprietary director of the company that way she would have the benefit of lower PRSI but she would then lose some SW benefits.


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## z103 (24 Feb 2009)

Just like to update this thread.
I saw this post:
http://www.askaboutmoney.com/showpost.php?p=181110&postcount=12

and did a bit more research. I found this:
*http://www.revenue.ie/en/personal/circumstances/marriage.html*


*How will we be taxed in subsequent years?*

  The following options are available:


Joint Assessment
Separate Assessment
Assessment as a Single Person (Separate Treatment)
 You may choose the method of taxation which is best suited to your circumstances.
*What is assessment as a single person?*

 Assessment as a Single Person, (also referred to as Separate Treatment) should not be confused with Separate Assessment. Under Assessment as a Single Person each spouse is treated as a single person for tax purposes.
 Both spouses:


Are taxed on their own income
Get tax credits and the standard rate cut-off point due to a single person
Pay their own tax
Complete their own Return of Income form and claim their own tax credits.
 One spouse cannot claim relief for payments made by the other and there is no right to transfer tax credits or standard rate cut-off point to each other.
Back to Top
*How do I claim Assessment as a Single Person?*

 Assessment as a Single Person must be claimed in writing. Either spouse can make the claim and the election lasts until withdrawn by the spouse who claimed it. A claim for Assessment as a Single Person, if required, must be made within the tax year (preferably at the beginning).
 This basis of assessment can be unfavourable in some circumstances because you cannot transfer unused tax credits or standard rate cut-off point. Home Carer's Tax Credit cannot be claimed in respect of a spouse who cares for a dependent person and who may otherwise qualify for the relief. See examples in Leaflet IT2 - Taxation of Married Persons.







So it looks like we will be claiming for assessment as single people.


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## galleyslave (25 Feb 2009)

it gets better - if she's made redundant she's not entitled to jobseekers allowance either - she has to apply for the means tested option...
and this applies for x number of years to come even if she works for somebody else (not sure exactly how many years)


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## zac (21 Jun 2009)

I am a PAYE employee and get all my due tax credits. Now I plan to start a company with another friend (a part time venture), while keeping my current job, so if I hold more than 15% of the share and become a proprietary director, does that mean I will miss out on the tax credits on the income from my current employer, even if I dont have any income from my new company?


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## Graham_07 (22 Jun 2009)

zac said:


> I am a PAYE employee and get all my due tax credits. Now I plan to start a company with another friend (a part time venture), while keeping my current job, so if I hold more than 15% of the share and become a proprietary director, does that mean I will miss out on the tax credits on the income from my current employer, even if I dont have any income from my new company?


 
You keep  the PAYE credit once you have income from a non-proprietory PAYE employment. If you did not have that employment, i.e. only had the proprietory directorship then you would lose the PAYE credit.


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## Bar101 (22 Jun 2009)

You do keep the PAYE credit but that credit can only be applied to tax on PAYE income. It cannot be used to offset tax on other income.


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