Involving your family

Involving your family

You can employ family members in your business, provided the package is commercially justifiable. You can remunerate family members with a salary, and perhaps also with benefits such as a company car or perhaps medical insurance – and you can make payments into a registered pension scheme. An alternative to a company car is to provide a van: the maximum annual tax bill on the use of a company van is only £1,200 – or £1,400 with unlimited private use and free fuel.
You can also take family members into partnership, thereby gaining more flexibility in profit allocation. In fact, taking your non-minor children into partnership and gradually reducing your own involvement can be a very tax-efficient way of passing on the family business. Be aware that taking family members into your business may put the family wealth at risk if, for example, the business were to fail.
HMRC may well challenge excessive remuneration packages or profit shares for family members, so seek our advice first. If you operate your business through a trading limited company, under current tax law you can pass shares on to other family members and thus gradually transfer the business with no immediate tax liability in most cases. However, a tax saving for the donor usually impacts on the done, and you need to steer clear of the ‘settlements legislation’, so again, seek our advice first.

Contact Simon Cox or Michael Barton on 01772 735865