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  • Tax

    Paying family member for help with BTL

    Hi all, my Son is at university and currently helps me (part time) managing/maintaining a btl property at weekends/holidays.

    I pay for this work & help with his fees.

    Presumably I can use this as an expense?

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    My son works for me but he is self employed as an electrician

    and he invoices me for work he carries out

    Can I ask are you running a company or is the BTL in your own name

    if it’s in your name I don’t think you can just give him money I am sure HMRC will have a rule for this

    is he employed by you or is he self employed

    it has to be one or the other I would have thought

    i will be interested to see the answer on this topic

    but my guess is I don’t think it’s as easy as just saying he is doing my book keeping ect

    have a read of this https://www.telegraph.co.uk/finance/pers...d-tax.html

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.


    I own the btl in my own name and he helps out when he can.

    Not sure if he will be classed as self emp.?

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    I have posted a link you may find helpful

    I think the short answer is No unless you gift him part of the property

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    Learn Change and Adapt ?????

    All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.

    Hi

    Although I'm no tax expert, I'd have to agree with the consensus here. I would have thought that unless your son is registered with HMRC as self employed, invoices you and then declares the income received from you, it's hard to see how HMRC would view you paying his tuition fees as a legitimate expense. My wife and I are both registered as self employed, one of us is landlord and the other acts as the agent and invoices accordingly, paying whatever tax is due on the respective roles.

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    Your son either has a regular job and is paid via PAYE.

    Or he is self employed as a Sole Trader and gets occasional work - and if that is below the current £11850 Personal Tax Allowance he has no tax to pay - though above around £8200 there would be NI payable - and Sole Traders per se are normally liable for both Class 2 and Class 4 NI.

    My view would be that if you as LL are to be able to offset the son's labour costs against rent income - then in turn he must register as Sole Trader with HMRC.

    If you pay him only a few hundred each year then probably simpler to treat that as a gift in effect.

    But if you pay him a few thousand that is worth him paying some NI so you can offset his labour charge at 20%/40% - with him Invoicing you as necessary.

    Check out the NI costs for Sole Trader status and work out what the sweet spot is - eg where you save tax and he pays less than that in NI.


     

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    Simple put it down as an admin expense provided it is reasonable amount. 

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    Get him to send you an invoice for his work - expense it.

    What he tells the tax man is his problem.

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    DISCLAIMER just my personal opinion - for legal advice consult a qualified professional grown-up.


    The short answer is of course you can your workers. It is arguable that you need to pay him under the minimum wage rules - although I don't see the courts enforcing family arrangements.

    The question is not whether you can pay him but how and what is the tax impact.

    If he is doing work as an employee then you need to consider whether you need to report this under PAYE regulations. This will largely depend on whether he is earning over the necessary threshold.

    If he is self employed then he may need to register with HMRC and do a self assessment tax return (assuming his profits exceed £1000 in the tax year).

    There are other options which may be available for you to depending on the circumstances and sums involved but that is a separate discussion.

    You really should be taking specific advice as whether he is an employee or self employed is something which is very specific to the circumstances. It is not a choice like many think but a result based on the circumstances.

    Merry Christmas!

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022