Deduction for work invoiced by spouse?

[Catherine T]

I own a seasonal rental property in Canada. An agent handles advertising and takes payment, but does not set foot in the rental property, is hundreds of miles away from it, and pretty much does nothing other than market it and collect payment.

This year, I paid my husband to go open up the seasonal home which requires removal of dead trees blocking paths, doing a risk assessment (winters are fierce and weakened trees and the like are a real threat), ensuring pipes haven't burst, doing a full clean-up (bugs, mice take refuge in winter) and generally turning something that has been closed up for 8 months into a high spec rentable unit. He also manages remotely from the UK the local lady who does cleaning between rentals and the local guy who does lawn maintenance during the rental season and who deals with things like power outages. In the off-season, he does the bookkeeping. He spends 4 days every spring doing the "opening"; I pay him £150/day + travel expenses and in the off-season, I pay him £20/hour for what turned out to be 45 hours of managing the ad hoc local cleaner/maintenance guy, bookkeeping, social media marketing, and general management. Total paid to him as invoiced by him: £1500.

He is not an employee but self-employed (I hope) and has tracked and invoiced his hours. Rates are all market rates.

Income last year was not great --- around £11k. So as a percentage of income, it is significant but the reality is that these things had to be done so were fixed costs without which there would have been no business. But I am worried that HMRC will cause problems just because I am paying my husband and not a third party. I would have thought that as long as I stuck with market rates I would be ok. Any thoughts?

[LozaACCS]

If it was necessary to do the work in order to operate the letting business and your husband was paid a commercial rate, then the amount is deductible.
There might be an argument levelled that a duality of purpose exists (your husband using the facilities as a holiday home), the more detail you have to counter such an argument the better.

[King_Maker]

HMRC may require more details about your husband's self-employment.

Does your husband have other clients?

Is there a written agreement for the supply of his services?

[bd6759]

You didn't pay him £1500. You paid him £1500 plus travelling expenses to Canada and back. Would you really have paid someone else to do that?

[LozaACCS]

So Catherine T

You have three opinions

1 I believe you have a deduction if you can overcome the duality of purpose issue.
2. Kingmaker appears to suggest that you need a higher burden of proof presumably to overcome the duality of purpose issue.
3. BD 1679 appears to suggest you are just a free loader trying to sneak a holiday for your husband through the books.

You should take whichever advice you choose

[bd6759]

3. BD 1679 appears to suggest you are just a free loader trying to sneak a holiday for your husband through the books.

No. What I said was it will be difficult to show that a payment a to spouse was exclusively for the purpose of the trade if it is highly improbable that the same payment would have been made to someone else.

[King_Maker]

My earlier post was to point out that HMRC might need more than a mere assertion that the husband was self-employed rather than an employee.

[Catherine T]

Many thanks for all your input. The reality is that I would have to hire someone who knew all the ins and outs and who I trusted to do the annual risk assessment and to get the property into a rental state. Locals are...well, local. They don't do a great job on the check in / out during the rental season and I would hardly trust them to get the place in shape for the season. I have tried to hire family/close friends (ie whom I trust) over in Canada, but they all have lives and are busy.

There is a pretty good argument against freeloading....anyone who knows the Canadian Shield in May knows it is blackfly season and you don't even try to rent a place out then. It is no fun. You wouldn't go there for a holiday yourself then either -- coldish, but blackflies would eat you alive. So we deliberately send him over then rather than in June which could, hypothetically, have decent weather and in some years blackflies have gone by then. We are also careful that he goes over alone (ie without me and kids) to emphasise that it is work-related. I am hoping that that suffices. The reality is that someone we trust and who has a sense of what hospitality is about needs to set things up for the season and ensure things work. Trees at risk of falling on renters, a dock that has disappeared with the ice in the winter, dead mice in hidden places a local wouldn't bother checking...these are all attention to detail items that the local labour market won't do. I am hoping I will be able to convince the two tax authorities that this is indeed bona fide (which it is). I could, of course, get my husband to go over for free...but his time is worth money and he could be doing a contract for someone else...

[Lambs]

C,

Wages paid to a spouse are a common occurrence. While they are sometimes subject to a little more scrutiny than appointments of third parties, if the amount paid is commensurate with the work undertaken, you should have no objection from UK tax authorities. If I have appreciated the thread correctly, the amount paid is fairly modest, and the work undertaken is genuine. Perhaps it would be helpful for him to keep a basic log of the work done while over there (a brief list of chores - no need to go mad) to substantiate the number of days spent. I think it is also helpful that he goes over alone, so there is little opportunity to enjoy with family. Of course, I might suppose that if he be anything like me, respite from young children would be worth its weight in gold. But maybe that's just me. My wife wastes no opportunity to remind me how selfish and lazy I am. She's probably right.

Regards,

Lambs

[Incredulum]

My earlier post was to point out that HMRC might need more than a mere assertion that the husband was self-employed rather than an employee.

Would it make any difference from HMRC's perspective? He'll be under the NI thresholds, won't he?