A real employment?

Feb 7, 2018

Craig Simpson, Tax Partner at Bates Weston draws attention to the dangers of paying wages to relatives.

A recent First Tier Tribunal Case finds that wages paid by a self-employed individual to his son were not deductible for tax purposes.

The case of Nicholson v HMRC [2018] UKFTT 14 (TC) shows the dangers of paying wages to relatives where it may not be possible to correlate the actual work performed to the wages paid. In this case the taxpayer was helping to support his son through university and wages were paid on the basis of a 15 hour week paid at £10 per hour for promotion of the taxpayer’s business. The taxpayer claimed a deduction for £7,400 but a tax deduction was denied as there was a duality of purpose to the payments. The FTT found that the expenses were not incurred wholly and exclusively for business purposes but that there was a dual purpose of providing support at university. There was no detailed record of the work performed to substantiate the 15 hours a week paid.

If you have clients who are paying wages to adult children and may be caught by this decision then please contact us to discuss your tax planning on 01332 365855. craigs@batesweston.co.uk

As always we must remind you that this article is generic in nature and you should take no action based upon it without consulting your professional advisor.

More posts you might like

Vacancy for Marketing Manager

Vacancy for Marketing Manager

Are you a creative, strategic thinker with a passion for content, communications, and brand? Bates Weston, a leading independent accountancy firm in Derby, is looking for a Marketing Manager to take the lead in telling our story – and helping our clients understand the value we bring.

read more
Spring Statement Summary 2025

Spring Statement Summary 2025

A summary of the Spring Statement 2025 and the main changes that come into effect from April 2025 and beyond. The changes were announced well ahead of the Spring Budget.

read more
Xero Platinum partner logo
ICAEW logo

Looking to grow? Take the next step

From compliance to growth, our accounting firm in Derby has you covered. Call us to see how we can help.

Got a query?
We’re here to help – just ask