Business Personal Finance

Tuesday 19 November 2019

Will Revenue allow me to employ my nephew on the family farm?

Your Questions

'It is common practice in many family farms and businesses to engage children, spouses or other close relatives as employees.' Stock image
'It is common practice in many family farms and businesses to engage children, spouses or other close relatives as employees.' Stock image
Charlie Weston

Charlie Weston

Q: I run a family farm in Louth, and my 16-year-old nephew helps me for about 10 hours a week during school time with some administration and light help on the farm. He has been a great help, and during school holidays I would like to employ him full-time while he is off school. I want to register him for tax so that he is set up properly. Will this be allowed by Revenue, as he is family?

A: It is common practice in many family farms and businesses to engage children, spouses or other close relatives as employees.

Wages paid for work done by family members are an expense of the business, and the tax deductibility must be considered like any other expense, according to CEO of Taxback.com Joanna Murphy.

She said paying wages to a family member through the PAYE system can save a significant amount of tax.

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The central provisions for deductibility are that payments are bona fide, the duties are genuinely performed wholly and exclusively for the purposes of the trade, the remuneration is commensurate with the work and time input, and the payment is received by the family member. Under the Protection Of Young Persons (Employment) Act 1996, the maximum working week for people aged 16 and 17 is 40 hours, with a maximum of eight hours a day.

Regulation allows the detail of the act to be modified in relation to employment of close relatives in a family business or farm, provided the conditions of employment meet the terms of the EU directive, and the health and safety of the young people concerned are not at risk.

The minimum wage since January, is €9.80 per hour. Under-18s can earn up to 70pc of that: €6.86 per hour. Revenue will require that the wages are actually seen to be paid, so he would need a bank or credit union account, Ms Murphy said.

Q: I am 47 and run a small web design agency with my business partner. I am now in a position where I can look at securing my own personal financial situation. I have three children and my husband stays home to look after them. We both have small personal pension plans, but as the primary earner, I feel a bit exposed. Should I take out a regular life insurance policy?

A: On the basis that you are not in a company pension, but rather contributing to a personal pension, you are eligible to take out a highly tax-efficient type of life cover called pension term assurance.

With this type of plan, you are entitled to tax relief on each monthly premium that you pay, according to Barry McCutcheon of Royal London. Assuming you pay income tax at a rate of 40pc, and your monthly premium is €100, the net cost to you would be €60.

There are maximum contributions allowed for tax relief based on your age, which would currently be 25pc of earnings for you, Mr McCutcheon said. This percentage is capped at an earnings limit, currently €115,000, and includes contributions to other approved pension arrangements.

This type of life cover is not only excellent value because of the tax break but, most importantly, it provides a lump-sum amount for your family if you die before retirement, he added.

Q: The recent collapse of Thomas Cook got me thinking about what happens to consumers in these situations, particularly because I have just spent a small fortune on a once-in-a-lifetime family trip to Lapland. I have travel insurance, but would I be covered if something like this were to happen to the tour operator?

A: Travel insurance policies will have different terms and conditions, so when taking out a policy, it is important to know exactly what you have cover for. Your first recourse if a tour operator were to go bust would be to see what compensation you could get directly from it, according to Deirdre McCarthy of Insuremyholiday.ie.

You should approach the aviation authority, particularly if you were on holidays when this happened. If you paid by debit or credit card, it is likely card providers would facilitate a refund, Ms McCarthy said.

Your travel insurance will kick in if the policy terms set out that you have insurance for things like scheduled airline failure, or if your booking was Atol-protected.

In terms of the actual policy, if for example you had taken out insurance cover for a trip which could not go ahead, then many insurers would facilitate a transfer of cover to another trip you planned at a later date.

Wages paid to a family member are an expense of the business. This means the tax deductibility must be considered like any other expense.

With a personal pension plan you can avail of pension term assurance life cover.

You are entitled to tax relief on each monthly premium that you pay.

Irish Independent

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