Tax deductions for paying wages to family members

If your son or daughter helps you in the family business, how do you make sure their wages are tax deductible?

A recent tax tribunal case (Nicholson v HMRC) highlights some issues.  Mr. Nicholson claimed his son helped him by delivering leaflets etc. His wages were £10 per hour for 15 hours per week. Unfortunately, there was no evidence of the wages being paid.

There were payments for food and drink to help his son at university. The tribunal concluded that the payments were made out of “natural parental love and affection” and concluded that Mr. Nicholson was doing nothing more than supporting his son at university.

The advice in similar situations would be to keep proper records of the hours worked and payments made, and payment should be made from the business account to the son’s account. If the son was on the payroll, then this would also go a long way to help with any queries from HMRC.

If you employ family members then please contact us if you need help or advice in this are.








Leave a Reply