As always when it comes to children, there are decisions to be made. One that you may not have considered yet is whether to employ them in the family business (assuming they want to join you in the first place).
It’s something worth thinking about since it has its benefits for everyone involved and can save you money in the long term.
The idea of using the company to pay for things so that it can claim back any tax is one that is used by many directors and business owners across the world. It doesn’t always work like that though. If the thing that is being bought might not even be tax deductible, and all you have done is save yourself the expensive of buying it personally. Not that that’s a bad thing, but it may not benefit your company.
But paying for the services of a family member does benefit the company – it gives it another employee to carry out necessary work. And it satisfies HMRC’s ‘wholly and exclusively’ rule (whereby anything that you want to deduct the tax from must be used ‘wholly and exclusively’ by the company). It makes no difference whether the person you are employing is a family member or not. And as long as the salary is at the right kind of level for the work that is being paid for, the company will even be entitled to a tax reduction.
But what if there is no job, or no job that your child has the skills to do? You can create one. There are no rules against it. It can be anything from making the tea to cleaning the warehouse to filing or anything else. As long as the salary isn’t out of line with the work being done, it really doesn’t matter what the job is. It just has to be of use to the company.
If you do it this way, then you’ll be saving money personally as you’ll no longer be handing out cash when the kids ask for it. Plus, it’s a great way of teaching them the value of work, and how to budget carefully (especially if they are paid monthly).