Splitting 1 income between husband and wife

[YerMan30]

Hello all,

I am self employed and my wife does not work.

Other people have told me that in similar situations they have allocated part of their income to their spouse to maximse their income taxed at the lower rate, and they have claimed the PAYE tax credit on this income.

Is this allowed?

Many people seem to do this (through their accountants) but I can't find any information on the revenue website to confirm that this is permitted.

Any clarification would be appreciated.

Thank you.

 

[vandriver]

Check revenue briefing 68 which states that payments between an individual and a spouse are not eligible for paye tax credit.

 

[YerMan30]

What about using this arrangement to increase the lower rate tax band?

In this case I am not registered as an employer, so no paye/prsi has been paid during the year.

 

[vandriver]

Could you employ your wife to do meaningful work for you eg accounts ,credit control etc and pay her up to €26,400 to maximise your SRCOP?Worth checking with your accountant

 

[Graham_07]

see next post

 

[Graham_07]

(a) The PAYE credit is not allowed as mentioned in spouse-spouse employments.

(b) If the spouse(wife in your case) actually works in the business for pay then that is perfectly aceptable and is an allowable business expense. She can then earn up to the €26,400 at the lower rate. In this case the employer spouse registers as an employer and gets a proper certificate of tax credits for the employed spouse. Pay is then made to the employed spouse subject to the tax credits allocated.

(c) Spouse to spouse employments are not insurable under the Social Welfare Acts. Accordingly no PRSI is payable. The employment would be recorded at class M. However If the threshold for the Health Contribution Levy is reached then that 2% is payable and the employment is recorded under class K1.

Depending on the business you often find that the other spouse is heavily involved in the business but not on any official footing. e.g. the farmers wife who does the early milking 6 out of 7 days of the week , the builder whose wife takes calls, does the books, generally keeps things running in the office and so on. In such cases why should they not be paid for their work.