Paying girlfriend to reduce tax bill
- Thread starter Dell_Boy
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If your g/f is an employee you need to get a Cert of Tax credits from her and assuming she has no other income, you can pay her up to 5 times the amount on the tax credits. You will be liable for PRSI as her employer of approx 10% and you will have to deduct PRSI from her wage.
dell boy
will she actually be doing work seriously? revenue do not appreciate schemes like that being put in place, will you be able to back this up in the case of a revenue audit because they will check it
fyi employers prsi is 10.75% if paying her more than €356 per week if less than its 8.5%
will she actually be doing work seriously? revenue do not appreciate schemes like that being put in place, will you be able to back this up in the case of a revenue audit because they will check it
fyi employers prsi is 10.75% if paying her more than €356 per week if less than its 8.5%
Yeah, but I reckon revenue would have a hard time proving it - in fact an impossible time proving it, unless of course they monitor her every movement and do an analysis of time spent etc
It's obviously more of an issue if it's your wife involved (and she does not then qualify for the paye credit in most cases, but your girlfriend does), but as it's your girlfriend, then there should be no problem (who said the married couples get all the tax advantages).
Wrong way round - Revenue don't have to prove that she is not a legitimate employee - You have to prove that she is.Glenbhoy said:Yeah, but I reckon revenue would have a hard time proving it - in fact an impossible time proving it, unless of course they monitor her every movement and do an analysis of time spent etc
As Dell_Boy has said, she would be doing admin work for him so the employment is legitimate.
My question is this - if Dell_Boy wanted to pay any employee (g/f or not) an extraordinarily high hourly rate, what can the Revenue do about it? Surely as long as he complies with minimum wage legislation, Revenue have no right to limit how much an employee can be paid?
Dell_Boy said:
My question is this - if Dell_Boy wanted to pay any employee (g/f or not) an extraordinarily high hourly rate, what can the Revenue do about it? Surely as long as he complies with minimum wage legislation, Revenue have no right to limit how much an employee can be paid?
42% tax plus 6% PRSI/health levy (up to the relevant employee limit) plus 10.75% employer PRSI.
I presume that the original query relates to splitting the company owner's current income between him and the girlfriend in order to avail of the latter's tax credits/allowances and thereby pay less tax overall?
If I owned a business I would certainly run this one by my accountant to get an independent, professional opinion on the ins and outs.
I presume that the original query relates to splitting the company owner's current income between him and the girlfriend in order to avail of the latter's tax credits/allowances and thereby pay less tax overall?
If I owned a business I would certainly run this one by my accountant to get an independent, professional opinion on the ins and outs.
ClubMan said:
As you mention it, remember reading in Brian O'Kanes book http://www.startingabusinessinireland.com/ that one of the first things to do in any family business is to employ and pay a wage to your children, rather than giving them pocket-money that you've already paid tax on.
Personally, I don't see any problem whatsoever in Dell_Boys query, as he states that his g/f would do admin work for him and that presumably he wouldn't be paying her enough to exceed her tax credits, therefore the amounts would be small enough - in the region of €4-6k p.a. so about €100 a week for say 5-6 hours work? It'd be well-paid admin work, but not excessively so imho.
ClubMan said:
It would be assessable for both CGT and stamp duty but I'm assuming that as with all small, 'one man band' limited companies the share captial is something like 1 euro and that Denis O'Brien isn't looking to stage a takeover thereby forcing the value of the shares up.
Jack The Lad
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Dell Boy,
Not 100% au fait with student grants these days, but thought I should run this by you anyway, just in case it's relevant. If your girlfriend is a recipient of grants etc, are they means tested? Would a wage affect her ability to receive?
Also, and please, please don't take this up the wrong way... I wish you both the best... but if you guys were to have a big falling out and split up, and things got a little heavy... what do you do with your girlfriend the employee? Fire her? Is there a possibility of unfair dismissal, redundancy, etc etc?
Not 100% au fait with student grants these days, but thought I should run this by you anyway, just in case it's relevant. If your girlfriend is a recipient of grants etc, are they means tested? Would a wage affect her ability to receive?
Also, and please, please don't take this up the wrong way... I wish you both the best... but if you guys were to have a big falling out and split up, and things got a little heavy... what do you do with your girlfriend the employee? Fire her? Is there a possibility of unfair dismissal, redundancy, etc etc?
dam099 said:
Shares in a company are only worth what someone is willing to pay for them. I've been there and it is not a problem and quite normal for shares in very small private companies to be moved in this manner. The OP could also issue additional shares to this girlfriend, thus diluting his holding and enabling her to become a proprietor director which means the company would not be liable for 10.75% employer PRSI on her wages.
Becoming a director involves significant responsibilities that people should not take on lightly or without due consideration of all of the implications. I still believe that the best course of action for the original poster is to talk to his accountant/tax advisor to get independent, professional and comprehensive advice on the relevant legitimate tax planning/financial engineering options open to him and his partner.
I have my own limited company and employed my sister to do admin work for me while she was a student. I also made her a director to reduce the PRSI liability.
My sister now has a full time job so I can't avail of her credits anymore.
I would be nervous of proving the legitimacy of her employment in the case of an audit, but I'll cross that bridge if I come to it.
Your co-director has to sign your end of year accounts so keep this in mind if you do end up falling out with your gf - make sure she resigns and you sign up a new director!
My sister now has a full time job so I can't avail of her credits anymore.
I would be nervous of proving the legitimacy of her employment in the case of an audit, but I'll cross that bridge if I come to it.
Your co-director has to sign your end of year accounts so keep this in mind if you do end up falling out with your gf - make sure she resigns and you sign up a new director!
If this is a limited company then doesn't it require at least two directors at all times? Where there are two directors then each must sign the B10 to "release" the other and appoint a new director if the time comes. In this case one could refuse and insist that they remain on. Casually appointing people directors just for the purposes of avoiding taxes is not very prudent as far as I can see. Once again independent, professional advice on the tax, legal and other implications of such decisions is essential.Helen said: