You can employ family members in your business, provided the salary and other benefits you pay them is commercially justifiable. You can remunerate family members with a salary, and perhaps also with benefits – such as a company car or van. However, before buying a vehicle through the business you should discuss this with us as it is possible to incur a personal tax charge on a car including the use of fuel for private purposes – the tax cost of cars can be even greater. Other options include medical insurance or making payments into a registered pension scheme.
You can also take family members into partnership, thereby gaining more flexibility in profit allocation. In fact, taking your children into partnership and gradually reducing your own involvement can be a very tax efficient way of passing on the family business. Be aware, though, that taking family members into your business may put the family wealth at risk if, for example, the business were to fail. GRA may challenge excessive remuneration packages or profit shares for family members, so seek our advice before you make any decisions.
If you operate your business through a limited company, under current tax law you can pass shares onto 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 recipient and you also need to steer clear of the anti avoidance rules, so again, seek our advice first.