A133nwa
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Can anyone help me in this question I don't know where to start from please the people who have study F6 help me out thank You

Mr. Hughes has decided to set up his own housing consultancy business on 1 January 2016 preparing accounts to 31 March each year. His business plan shows profits in the region of £72,200 per year, before any payment to his wife, Sandy. He hopes that his new business will provide advice to other property owners thinking of renting out their properties and also management services for rented residential properties. In the longer term, he hopes to build up a portfolio of properties for rental.

His wife (Sandy) is 52 years old .Sandy has been employed as a bookkeeper since 2008, earning £2,000 per month (Monthly PAYE £233 deducted).She will cease her current employment on 31 December 2015 and will keep the books and prepare the accounts for Hughes’s business from 1 January 2016 .She will continue to work the same number of hours per week as she does in her current employment.

Mr. Hughes would like some advice on the taxation implications of involving his wife, Sandy, in his business either as an employee, or, alternatively, by taking her into partnership.

Required:

Evaluate the taxation implications for Mr. Hughes of:

(1) Hughes employing his wife Sandy, and
(2) Taking her into partnership
Support your answer with calculations of the income tax (IT) and National Insurance Contributions (NIC) payable, based on the expected trading results for a full year of operation and the tax rates and allowances for 2014/15.
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Illusionary
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(Original post by A133nwa)
Can anyone help me in this question I don't know where to start from please the people who have study F6 help me out thank You

Mr. Hughes has decided to set up his own housing consultancy business on 1 January 2016 preparing accounts to 31 March each year. His business plan shows profits in the region of £72,200 per year, before any payment to his wife, Sandy. He hopes that his new business will provide advice to other property owners thinking of renting out their properties and also management services for rented residential properties. In the longer term, he hopes to build up a portfolio of properties for rental.

His wife (Sandy) is 52 years old .Sandy has been employed as a bookkeeper since 2008, earning £2,000 per month (Monthly PAYE £233 deducted).She will cease her current employment on 31 December 2015 and will keep the books and prepare the accounts for Hughes’s business from 1 January 2016 .She will continue to work the same number of hours per week as she does in her current employment.

Mr. Hughes would like some advice on the taxation implications of involving his wife, Sandy, in his business either as an employee, or, alternatively, by taking her into partnership.

Required:

Evaluate the taxation implications for Mr. Hughes of:

(1) Hughes employing his wife Sandy, and
(2) Taking her into partnership
Support your answer with calculations of the income tax (IT) and National Insurance Contributions (NIC) payable, based on the expected trading results for a full year of operation and the tax rates and allowances for 2014/15.
I'm not (and haven't been) an ACCA student, but I'd suggest that what you should be looking at is that paying a salary to an employee is a tax-deductible expense for Mr Hughes, whereas a new partner's profit-share is a share of the tax-adjusted profits of the business. The question's statement that Sandy "will continue to work for the same number of hours" is probably meant to suggest that you assume that her income will continue to be £2,000 per month, so you can use that to prepare some illustrative tax computations.
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DJKL
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Areas to consider in the computations are:

Class I national insurance both employees and employers is she is an employee
Using the two personal allowances and two basic rate bands re both methods, if salary to her restricted to £24,000 plus NIER less £2,000 employment allowance then husband will have some profit in higher rate band.
Impact of Class IV and Class II NI going the partnership route

Whilst you are not asked to consider a company route, having a limited company with both earning a salary sufficient to give them credit for state pension and using their personal allowances, paying corporation tax on remaining profit and distributing post tax profits as dividends to both of them is likely to be the most tax efficient re profit extraction. (However beware company car benefits if appropriate)

Other area of concern, is she is to be an employee, is need to set up and run Auto Enrolment pension scheme.

As the earlier post indicated, crunch the numbers.

The question appears to be assuming/ implying that as she earned £2,000 a month as a bookkeeper that that is a reasonable salary level and HMRC would not dispute it as an expense that was wholly and exclusively for the purpose of the trade. I personally am not convinced that this holds water, given the size of the business in excess of £24,000 a year for bookkeeping and accounts appears disproportionate, but maybe she will be doing admin/property management as well. (I prepare accounts, vat, payroll, all accounting entries for a real property management company, circa 3-4 times the size by turnover, and my fee is circa £5,200 per annum)
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