Can I 'pay' my wife for working in my company

G

Glenbhoy

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435
Hi all,

I have a small business which does quite well, I would like to know whether or not i can pay my wife a salary of 19K from my business although her services would not command this salary on an arms length basis.

Any suggestions much appreciated.
 
I was thinking that, but is it too obvious that I'm only trying to overcome the effects of indivualisation. Do the revenue really care about these things?
 
why would they, once you're paying PAYE/PRSI however minute. what does anybody else think?
 
If the Revenue ever audit you and if they are unhappy with this arrangement, they may disallow any tax benefit arising and force you to repay the difference in tax along with interest and penalties, Whether or not this is ever likely will depend on your own circumstances and those of the business. Talk to your accountant or business advisor for specific advice before doing anything.
 
It's only worthwhile if your own income is above €38,400 but I think you know this anyway.

If this is the case, put her on the books. You can give her a salary up to €20,400 in 2005 at low tax rate. Only small disadvantage is that she will lose the home carers allowance (if she was ever entitled).
 
Thanks for that everyone, I will also talk it over with my accountant, that director option may make the most sense, really appreciate your comments.
 
Don't forget if you make her a director instead of a regular employee, she will not be entitled to the paye allowance. this would cause an additional cost of €1,270 for the 2005 year. No real need to make her a director so why cost yourself the €1,270.
 
As she is related to you, she won't be entitled to the paye credit in any event, regardless of whether she is a director or not.
 
no, the paye credit is not available in any case where a family member of a director is employed in the company.
 
ubiquitous said:
no, the paye credit is not available in any case where a family member of a director is employed in the company.
Click to expand...

Correct about the spouse but I think the PAYE credit is still available to a child of a prop director.
 
"no, the paye credit is not available in any case where a family member of a director is employed in the company"

that's not true,

you are correct with the spouse but not with the children.


the credit may be claimed by children of proprietary directors and the self employed who are full time employees in the business of their parents and where certain conditions are met, which are -

(a) PAYE must be operated in respect of the employment, and

(b) the individual's income from the employment must be at least €4,571
 
AFAIK if you pay her as a Director rather than an employee then you will avoid paying employer PRSI (10.75% i think).
 
michaelm said:
AFAIK if you pay her as a Director rather than an employee then you will avoid paying employer PRSI (10.75% i think).
Click to expand...

Not quite that simple.

If she hasn't got the relevant shareholding, SW(scope section) may decide she is class A rather than S and employer PRSI would have to be paid.

If SW did decide she was class A PAYE credit would still not be due.
 
...eeeh we'll isn't she gonna be taking the money from you anyway :) ..so why not have her on the payroll so that you potentially get some tax benefits
 
The company wouldn't be entitled to a CT deduction for the excess of the salary over the arm's length rate - not wholly and exclusively for the purposes of the trade. Also, have seen cases where Revenue gave the PAYE credit to proprietary directors, rang Revenue up to say the directors not entitled, Revenue insisted they are, despite the legislation specifically denying it. Was there something in the 2005 Finance Act re PAYE credit for directors?
 
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