Mark McLaughlin looks at wages payments by the self-employed to their offspring, and whether claims for a tax deduction are allowable.
It is not uncommon for the self-employed to enlist a family member (e.g., offspring studying at university and earning spending money at weekends) to help in the business occasionally.
How much can the parent reasonably pay?
To be an allowable business expense in such circumstances, wages payments to the family member must be ‘wholly and exclusively’ incurred for the purposes of the trade (NB. an identical rule applies to companies, but this article focuses on unincorporated businesses).
Don’t go overboard!
HM Revenue and Customs (HMRC) will sometimes look at the level of payments to the family member and seek to establish whether the remuneration paid significantly exceeds market.
