Contracting over 65

[gingerjedi]

Quick question for an accountant:

My father contacted me out of the blue last night as he's been offered some aerospace consultancy work. He lives in Spain and he's had his feet up for a while so not really clued up at the moment, he asked if he could join my co for the purpose of invoicing but I have no idea if that's feasible?

As he's over 65 and NIC's don't apply (is that the same for employers?) would he be better off just using a brolly?

[Martin at NixonWilliams]

It is possible for your fathers income to be passed through your company however this presents you with a number of issues. It would probably be easier for your father to set up his own company or use an umbrella if the contract is short term.

The main complication arises in considering how he should be remunerated for the work done. The common options are:

- The easier option would be to pay your father a salary in line with the work done however this may attract a lot of tax and employers NI depending on the amount of work being carried out.

-I would advise against giving your father shares, this would be very complicated as there are a number of issues associated with the initial transfer of the shares to your father and then further issues once he stops working through the company.

- A separate class of share could be created that allows only dividends to be paid to your father in line with the work done however there is a lot of work involved with creating the additional shares and updating the company's articles etc.

Note that if your father goes with the low salary and the remainder of dividends, whether through your company or not, the usual £7,696 salary recommendation is unlikely to be the best option for him. He will be entitled to a higher personal allowance, however this is tapered away if his total earnings exceed £26,100.

If your father does join your company be aware of the deregistration threshold for the flat rate scheme (currently £230,000 including VAT).

I hope this helps.

Martin

[gingerjedi]

Thanks for that.

From what I've been reading no NIC's apply as long as he's over retirement age within the given tax year.

I think I'll recommend that he uses a brolly.

[Jessica@WhiteFieldTax]

Concur with Martins advice.

[Martin at NixonWilliams]

Thanks for that.

From what I've been reading no NIC's apply as long as he's over retirement age within the given tax year.

I think I'll recommend that he uses a brolly.

Employees NI will not be deducted, but Employers NI remains payable for employees over the age of 65.

[ASB]

Search button broken ?

In UK terms it's pretty east for him to get the exemption (which is reaching state pension age, 65 for him). Some info on this:-

HM Revenue & Customs: Making sure you've stopped paying National Insurance

With this is place it seems to me, that assuming you intend to pay him the same amount it would make stuff all difference to the UK end of things. Who knows about the Spanish end of things though. Brolly would therefore be less hassle (in my view).

However, an alternative, he invoice you, you pay the invoice, he sorts everything else out.

You don't give any indication of the length, but if it's short it may potentially all be tax exempt in the UK.

PAYE82000 - PAYE operation: international employments: EP appendix 4: criteria for short term business visitors

[gingerjedi]

No NIC's is how I read it:

If you continue in self-employment
If you stay in self-employment after you reach State Pension age you should no longer pay Class 2 National Insurance contributions. However, you may still have to pay Class 4 National Insurance contributions. These are an annual charge and you may still have to pay them on any taxable profits for the year in which you reach State Pension age. You won't have to pay them from the beginning of the following tax year.

[Martin at NixonWilliams]

No NIC's is how I read it:

[quote HMRC]If you continue in self-employment
If you stay in self-employment after you reach State Pension age you should no longer pay Class 2 National Insurance contributions. However, you may still have to pay Class 4 National Insurance contributions. These are an annual charge and you may still have to pay them on any taxable profits for the year in which you reach State Pension age. You won't have to pay them from the beginning of the following tax year.

[/QUOTE]

Class 2 & Class 4 NI relates to self-employment - Are you a sole trader or do you operate a limited company? If the latter both of these classes of NI can be ignored.

[gingerjedi]

Class 2 & Class 4 NI relates to self-employment - Are you a sole trader or do you operate a limited company? If the latter both of these classes of NI can be ignored.

Sorry, a little confused.

So if he operates under a brolly he still has to pay employers NIC's but not employees??

Sounds crazy to me.

[Martin at NixonWilliams]

That's correct