Employing a student

[Platypus]

The rules for employing students are clearly laid out by HMRC:
HM Revenue & Customs: Student employees

Has anyone done this, specifically when the student was their own son or daughter ?

If so, any tips, pitfalls, do's or don'ts ?

Clearly, I'll check with my accountant, but it's more likely that someone on here has experience of doing this whereas I'll bet that my accountant just looks up the same rules that I indicated above.

TIA.

[Wanderer]

Has anyone done this, specifically when the student was their own son or daughter ?

There are always going to be people who are suspicious that the parent was "employing" their child as a tax avoidance measure and that in the absence of the "employment", they would have given the child the money anyway.

Can't see anything wrong with it though, if it's a genuine family business go right ahead.

[d000hg]

Don't get romantically involved with them would be my advice, especially if it's a family member.

[Jessica@WhiteFieldTax]

Re your own kids:

If they are below 18 then there is a risk from our old friend the Settlements Legisltion.

There is also a risk of the expense being disallowed if they are not doing a substantive role for their payment - the problem here is that although the expense is disallowed it's still taxed on the recipient.

Subject to those risks it can be done, and clients have done it without difficultly.

If you have in mind trying to offset their tuition fees or similar then you are entering a minefield I'ld advise you to avoid.

Re other kids: no tax issues, but there are restrictions on the hours they can do. And on H&S grounds, supervision by Radio 1 DJs isn't recommended.

[Platypus]

There is also a risk of the expense being disallowed if they are not doing a substantive role for their payment - the problem here is that although the expense is disallowed it's still taxed on the recipient.

This is my only concern, but does it happen in reality?

I wonder if this is like the monthly dividend thing... everyone is afraid to do it, but in reality there's no law against it and HMRC has never successfully claimed that divs are in fact salary and that NI is due.

[northernladuk]

This is my only concern, but does it happen in reality?

I wonder if this is like the monthly dividend thing... everyone is afraid to do it, but in reality there's no law against it and HMRC has never successfully claimed that divs are in fact salary and that NI is due.

The divi question is pretty irrelevant, you are allowed to take a divi whenever you want even if it is on exactly the same day as a permie gets paid. It is still a divi and a decision was made within the rules to do that. Paying someone for work that they didn't do isn't within any rules as many MP's and presenters have found out so it isn't similar at all IMO. That is all down to whether or not you get investigated of course......

[Jessica@WhiteFieldTax]

This is my only concern, but does it happen in reality?

I wonder if this is like the monthly dividend thing... everyone is afraid to do it, but in reality there's no law against it and HMRC has never successfully claimed that divs are in fact salary and that NI is due.

I've only ever seen it happen once in the last 25 years, and that was a £50k salary to daughter.

[Platypus]

Paying someone for work that they didn't do isn't within any rules as many MP's and presenters have found out so it isn't similar at all IMO. That is all down to whether or not you get investigated of course......

I think you're muddled on this one. MPs were investigated for cheating their expenses while presenters are being investigated for being disguised employees.

I've only ever seen it happen once in the last 25 years, and that was a £50k salary to daughter.

Thanks, that would not be my situation!!

[northernladuk]

No muddling here...

Tory MP faces ban for 'employing' son - Telegraph

A senior Conservative MP faces a two-week ban from the House of Commons after it emerged he improperly “employed” his teenage son - who was a full-time university student - as a Parliamentary assistant.

There was also a presenter accused of doing the same and MP's keep getting caught out paying members of family that don't work for them a number of times. Can't remember presenters name.
Anyway, different kettle of fish as this is in the public sector so will stop banging on about it. Sorry

[mudskipper]

No muddling here...

Tory MP faces ban for 'employing' son - Telegraph



There was also a presenter accused of doing the same and MP's keep getting caught out paying members of family that don't work for them a number of times. Can't remember presenters name.
Anyway, different kettle of fish as this is in the public sector so will stop banging on about it. Sorry

Yeah, but I think the point there is that the expenses were being funded by the public purse. If you employ your own offspring, the money comes from your limited. As long as the directors are happy with the arrangement, there isn't an issue. Probably.