A 2018 tribunal case has ruled that payments a father made to his son for promotional work were not deductible for tax purposes. For the payments made to be deductible, they would have to be made wholly and exclusively for the purposes of the trade. Part of the issue was that regular wages were not paid in cash and the payments had an element of “parental affection”.

Employing family members, including children, is a well established tax planning tool for owner-managed businesses. Provided there’s a business reason for doing so, there shouldn’t be a problem.

Ensure you keep robust records to allow payments to be reconciled and linked to work done. Make sure that amounts paid don’t exceed what a third party would charge for the same work, and ensure that the work is actually necessary and is done.

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