A friend of mine has decided to go crafty. I, being an accountant myself, want to tell him to stay away from it. But I canÂ’t pin point the legislation he is falling fowl of. Please help!!!
Before I delve in the issue, remember the HMRC definition of employees (those subject to Class 1A NIC) and employers (those responsible for Class1B NIC).
Here is the issue. Mr X, employed with Y Ltd, intends to declare part time self employment with Mrs X as the only employee. Supposing his self-employment makes a little income, but pays considerable salary to Mrs X, his business goes into Loss, and he intends to claim tax relief for it. Mr X is not planning for overkill here so I am sure he shall be able to avoid tickling taxman/woman's fancy.
But then he intends to use the same self-employment to secure Mrs X SMP. The business is a home based business and it will be difficult to prove whether Mrs X is actually putting in the hours or not.
Please help by highlighting where Mr X is falling foul of the law so that I can persuade him to stay away from such scheme.
Thank you in advance.
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