Employ someone to save tax bill

farmernewbie

Hi Lads,

This maybe one for an accountant. I just took over a small family farm after my father passed away.

My mother just hit pension age and was getting deducted approx 50 euro a week because of farm. Max profit the farm would make is approx 6k. I thought this was harsh.

To avoid increases in stamp duty, inheritance taxes etc in the future I got it all transferred into my name. It would have went to me anyway in the future.

I am in a position where I work full time, my mother only has the pension so I give her all farm profits. This means I will have to pay a high rate of tax on profits though even though I pass most money onto mother. I am trying to keep the tax bill down by investing in farm, reseeding, drainage etc.

Are there other ways to keep the tax bill down? Could I set mother up as an employee and pay her €40 a week or something to avoid any problems with her pension?

Anyone in a similar situation? Any ideas?

Thanks.

Marooned75

Give lakill farm a shout he's an accountant

howardmarks

Small enough credit but moneys money.
http://www.revenue.ie/en/tax/it/credits/dependent-relative.html#section3
And you should seek advice about this one its not light reading. Only of benefit if your on the higher rate of tax.
http://www.revenue.ie/en/tax/it/leaflets/it7.html

Wouldnt advise the setting her up as an employee unless she is one as its fraud. Just my 2cents

epfff

howardmarks wrote: »

Small enough credit but moneys money.
http://www.revenue.ie/en/tax/it/credits/dependent-relative.html#section3
And you should seek advice about this one its not light reading. Only of benefit if your on the higher rate of tax.
http://www.revenue.ie/en/tax/it/leaflets/it7.html

Wouldnt advise the setting her up as an employee unless she is one as its fraud. Just my 2cents

No but my mum does a bit of self employed agri consultant work for me every year and is paid by cheque a few times a year

farmernewbie

howardmarks wrote: »

Small enough credit but moneys money.
http://www.revenue.ie/en/tax/it/credits/dependent-relative.html#section3
And you should seek advice about this one its not light reading. Only of benefit if your on the higher rate of tax.
http://www.revenue.ie/en/tax/it/leaflets/it7.html

Wouldnt advise the setting her up as an employee unless she is one as its fraud. Just my 2cents

Thanks, well I actually live away from the farm so she does the work during the week. Not much to it as it is just a few bullocks but technically she is doing the work.

farmernewbie

epfff wrote: »

No but my mum does a bit of self employed agri consultant work for me every year and is paid by cheque a few times a year

Do you take these cheques away from farm profits then? This is something I am currently doing. I want to keep it legal and not affect her pension.

okiss

At the moment you have to sort out the best way of pay the least amount of tax possible on the farm and any other income you have. You also have to sort out your mother pension.

If the department of social welfare are taking money off your mothers pension each week I think she is getting the Non-Contributory pension.
This is based on the number of stamps (prsi) that both she and your father would have paid since they started working.
This is means tested income so because they think she owns the farm/has farm income she is getting €50 a week less in her pension. Since your father died and you now own the farm she may be entitled to the full pension.

At this stage you need to do the following:
I would get an appointment with a qualified accountant and get there advice in regards to what to do re your own income and the future farm income from a tax point of view. They will know the allowances ect and what you can claim for. I would show them any letter your mother got re her pension as they will understand this. Ask them is she getting less pension as the department of social welfare thinks she owns the farm and has farm income.

If they think this is the case they will tell you the best way to sort this out. I would advise you not to pay her income from the farm as it will effect her pension.

If you go into welfare.ie and click on Bereavement you can find out if she is due any payment from the state since your father died.
If you click into the information on left of the screen you can find out more re pensions. I would advise you to read these together.

Here is the address ect of the Department of Social welfare that deal with pensions.
Social Welfare Services Tel:(071) 915 7100 Locall:1890 500 000
College Road
Sligo
Ireland

Once you speak to your accountant your mother can contact social welfare above or she can call into the local welfare office to sort this out.

I would advise her to have the following with her going to social welfare office.
Any paper work she got from welfare in regards to her pension, both her and your father pps numbers, your father death certificate, some photo id in her name and prof that the farm is now in your name. She needs to go to the information desk.
Get her to tell them that she has just got her pension, that her husband died recently and that her son now owns the farm which she is not getting an income from. They may ask her for more information to sort out her pension.
It may take them a while to sort this out for her but if she is due more money they will give her a lump sum once this is sorted out.

I hope the above is of some help to you.

farmernewbie

okiss wrote: »

At the moment you have to sort out the best way of pay the least amount of tax possible on the farm and any other income you have. You also have to sort out your mother pension.

If the department of social welfare are taking money off your mothers pension each week I think she is getting the Non-Contributory pension.
This is based on the number of stamps (prsi) that both she and your father would have paid since they started working.
This is means tested income so because they think she owns the farm/has farm income she is getting €50 a week less in her pension. Since your father died and you now own the farm she may be entitled to the full pension.

At this stage you need to do the following:
I would get an appointment with a qualified accountant and get there advice in regards to what to do re your own income and the future farm income from a tax point of view. They will know the allowances ect and what you can claim for. I would show them any letter your mother got re her pension as they will understand this. Ask them is she getting less pension as the department of social welfare thinks she owns the farm and has farm income.

If they think this is the case they will tell you the best way to sort this out. I would advise you not to pay her income from the farm as it will effect her pension.

If you go into welfare.ie and click on Bereavement you can find out if she is due any payment from the state since your father died.
If you click into the information on left of the screen you can find out more re pensions. I would advise you to read these together.

Here is the address ect of the Department of Social welfare that deal with pensions.
Social Welfare Services Tel:(071) 915 7100 Locall:1890 500 000
College Road
Sligo
Ireland

Once you speak to your accountant your mother can contact social welfare above or she can call into the local welfare office to sort this out.

I would advise her to have the following with her going to social welfare office.
Any paper work she got from welfare in regards to her pension, both her and your father pps numbers, your father death certificate, some photo id in her name and prof that the farm is now in your name. She needs to go to the information desk.
Get her to tell them that she has just got her pension, that her husband died recently and that her son now owns the farm which she is not getting an income from. They may ask her for more information to sort out her pension.
It may take them a while to sort this out for her but if she is due more money they will give her a lump sum once this is sorted out.

I hope the above is of some help to you.

Thanks Okiss, very helpful post. Yes it is non-contrib pension. Since farm was transferred she is now on full pension. I am a dreaded public servant and pay high rate of tax. I think I will take your advice and speak to an account.

donegal11

Okiss,I think the OP transferred it because she was being cut hence why he transferred it into his name. The non-contribution pension is paid due to lack of stamps due to factors such as the self employed were unable to put on stamps till 1988 leaving it to late to qualify for many pensioners and generally small farmers never made enough money to put on stamps and relied on farm assist which was excused from stamps till 2007. Leaving farmers asset rich and cash poor.

By paying her a wage she is no longer self employed(farming) and can claim up to €200 a week without affecting the pension as an employee and reduce farm profits to revenue and given she's pension age pay little or no tax(18000 exempt and no PRSI). Whether this situation is acceptable to revenue or SW I don't know. But given her age 66 and not 70 the excess income might stop her getting benefits such as fuel allowance and of course a medical card.

farmernewbie, did your father get his pension reduced while he was living? If she/he claiming farm assist they won't reduce pension below that previous level of assessment of means but since joan burton got her hands on it it's being destroyed.

I might be in the same position as you in the future and another unpopular possibility would be to just sell part of the farm and keep it in an account in your name that your mother can access to cut down in all the paperwork and stop revenue getting anything and potential solve a situation where a sibling wanted a share of the inheritance.

Did you transfer all the farm into your name or did your mum keep some under the understanding that you would farm it(Just in my case if anything happened each parent would own half). Did SW want the whole farm transferred or is the fact that the payments are in your name keep them happy?

lakill Farm

farmernewbie wrote: »

Do you take these cheques away from farm profits then? This is something I am currently doing. I want to keep it legal and not affect her pension.

If your paying her by cheque for work, she will need to declare the income abite there is a strong possibility that you should have her on the payroll and be paying her . She would be classified as an "S" stamp so not to bad with tax or prsi/usc

The reason i say payroll is she wount really be able to fight the corner and say she is a "contractor"

donegal11

lakill Farm wrote: »

If your paying her by cheque for work, she will need to declare the income abite there is a strong possibility that you should have her on the payroll and be paying her . She would be classified as an "S" stamp so not to bad with tax or prsi/usc

The reason i say payroll is she wount really be able to fight the corner and say she is a "contractor"

Paying by cheque like that would mean she's self employed leaving her in the exact same position with social welfare abit not owning the farm but as self employed her means are like for like basis for anything above €30, plus you'd be passing the burden regarding revenue to the mother, but to be honest I don't think revenue would care about her income as it's so little BUT they would care about you trying to reduce your tax bill( you could make losses that you could even offset against your PAYE income) and were such expenses legitimate.

PRSI wise as she's 66 none will be payable, it'll be class M I presume if you employ her as an employee on your payroll.

farmernewbie

donegal11 wrote: »

Okiss,I think the OP transferred it because she was being cut hence why he transferred it into his name. The non-contribution pension is paid due to lack of stamps due to factors such as the self employed were unable to put on stamps till 1988 leaving it to late to qualify for many pensioners and generally small farmers never made enough money to put on stamps and relied on farm assist which was excused from stamps till 2007. Leaving farmers asset rich and cash poor.

By paying her a wage she is no longer self employed(farming) and can claim up to €200 a week without affecting the pension as an employee and reduce farm profits to revenue and given she's pension age pay little or no tax(18000 exempt and no PRSI). Whether this situation is acceptable to revenue or SW I don't know. But given her age 66 and not 70 the excess income might stop her getting benefits such as fuel allowance and of course a medical card.

farmernewbie, did your father get his pension reduced while he was living? If she/he claiming farm assist they won't reduce pension below that previous level of assessment of means but since joan burton got her hands on it it's being destroyed.

I might be in the same position as you in the future and another unpopular possibility would be to just sell part of the farm and keep it in an account in your name that your mother can access to cut down in all the paperwork and stop revenue getting anything and potential solve a situation where a sibling wanted a share of the inheritance.

Did you transfer all the farm into your name or did your mum keep some under the understanding that you would farm it(Just in my case if anything happened each parent would own half). Did SW want the whole farm transferred or is the fact that the payments are in your name keep them happy?

Hi Donegal11,

Yes you are spot on with most things. I transferred it as I didn't want her pension cut and was also anxious to get herd number in my name as I was afraid of future rules and taxes that could come in. I could afford to do it now.

Yes she's non contrib and not enough of stamps. Asset rich zero cash, She does get medical card and fuel allowance. I wouldn't be paying her more than 5000 euro a year. Thats approx the sfp. No father was on full pension. When he died she was on widows allowance as had no income and that was assessed and cut and then after a few months she moved onto pension and that was cut by 50 euro a week I think.

Selling is not an option I would do. Farm is only approx 40 acres and would like to expand and take over some day myself. I wanted it in my name as eventually that would happen. SW didn't demand it all be in my name. An officer just called one day and mother said all had been transferred. She asked was if for tax reasons and mother just said she wasn't able for paper work side of farming. The SW officer said that was ok and she would get full pension and be back dated.

She had to show proof of farm transfer from solicitor, bank a/cs, etc. Ironically after 2 months we had no word and pension still cut. We rang and no one had looked at her file. It was then sorted within 2 weeks and she was backdated the money that was cut.

Should I contact revenue and ask then is it ok to employ her? Is it hard to set her up as an employee? Or is it legitimate to make a loss and write it off against paye? I thought I read somewhere you can do this for first 3 years only in a new business? Surely if you could do it for more every paye worker would be paying someone to help them.

Thanks for your responses.

lakill Farm

look go talk to your accountant. Im telling you they wount accept her been self employed and this idea that they don't mind how much she earmed as its only small is crap. A revenue auditor would sniff that out a mile.

First question in the door - so you work in x, that's a bit away, you claim trs or rent allowance in x and still you farm. Who looks after the arm mid week. do you pay someone cash, why aren't they an employee, where did you get the cash. Suddenly your trying to back fill the hole .

farmernewbie wrote: »

Hi Donegal11,

Yes you are spot on with most things. I transferred it as I didn't want her pension cut and was also anxious to get herd number in my name as I was afraid of future rules and taxes that could come in. I could afford to do it now.

Yes she's non contrib and not enough of stamps. Asset rich zero cash, She does get medical card and fuel allowance. I wouldn't be paying her more than 5000 euro a year. Thats approx the sfp. No father was on full pension. When he died she was on widows allowance as had no income and that was assessed and cut and then after a few months she moved onto pension and that was cut by 50 euro a week I think.

Selling is not an option I would do. Farm is only approx 40 acres and would like to expand and take over some day myself. I wanted it in my name as eventually that would happen. SW didn't demand it all be in my name. An officer just called one day and mother said all had been transferred. She asked was if for tax reasons and mother just said she wasn't able for paper work side of farming. The SW officer said that was ok and she would get full pension and be back dated.

She had to show proof of farm transfer from solicitor, bank a/cs, etc. Ironically after 2 months we had no word and pension still cut. We rang and no one had looked at her file. It was then sorted within 2 weeks and she was backdated the money that was cut.

Should I contact revenue and ask then is it ok to employ her? Is it hard to set her up as an employee? Or is it legitimate to make a loss and write it off against paye? I thought I read somewhere you can do this for first 3 years only in a new business? Surely if you could do it for more every paye worker would be paying someone to help them.

Thanks for your responses.

donegal11

lakill Farm wrote: »

look go talk to your accountant. Im telling you they wount accept her been self employed and this idea that they don't mind how much she earmed as its only small is crap. A revenue auditor would sniff that out a mile.

First question in the door - so you work in x, that's a bit away, you claim trs or rent allowance in x and still you farm. Who looks after the arm mid week. do you pay someone cash, why aren't they an employee, where did you get the cash. Suddenly your trying to back fill the hole .

If she's self employed she pays no tax or prsi and If she's an employee she'll still pay no tax or prsi, there'll be no extra tax or liability either way for him or his mother as class M prsi (zero liability) will apply in both cases.And if accepted as self employed she would have no net liability anyway(may be excused from filing returns).

I'd be more concerned if revenue came asking what she actually did on the farm say if there was no stock in the winter rather than the self employed aspect(but it's a common tactic once a child reaches 16 that they become employed(employee) in the farm to reduce the tax bill). But an accountant would be able/needed to guide as to what's acceptable not only in terms of employing your mother (PAYE preferable for SW purposes) but tax planning with regard offsetting farm losses against PAYE,reclaiming vat and provide help/cover in case a revenue audit.

Also if your paying by cheque or bank transfer there will be a clear audit trail so there'll be no question of where did cash come from. Your making it sound like the source of cash (DAS, Sfp,sales) is illegitimate or money laundered but in reality there would be no questionable black whole.

farmernewbie

lakill Farm wrote: »

look go talk to your accountant. Im telling you they wount accept her been self employed and this idea that they don't mind how much she earmed as its only small is crap. A revenue auditor would sniff that out a mile.

First question in the door - so you work in x, that's a bit away, you claim trs or rent allowance in x and still you farm. Who looks after the arm mid week. do you pay someone cash, why aren't they an employee, where did you get the cash. Suddenly your trying to back fill the hole .

Hi Lakill,

Why can't I set her up as an employee? Yes I do live in Dublin and claim rent allowance and my farm is in Galway. I buy weanlings from March and sell as stores in November. I travel home each wkd. During the week my mother does the herding, puts out some nuts, call a vet for a sick animal etc.

What issue will revenue have with this if I pay her 30/40 a week for this? Surely I am allowed to farm and live away from farm? I travel home each wkd, fencing, dosing etc. I'm not back filling any hole my mothers house is on farm and she looks after animals during the week. Surely loads of people have similar arrangements.

I only took over farm last year and all this is new to me. I am a paye working so don't have an accountant. Think you are right and I need to get myself one.

farmernewbie

donegal11 wrote: »

If she's self employed she pays no tax or prsi and If she's an employee she'll still pay no tax or prsi, there'll be no extra tax or liability either way for him or his mother as class M prsi (zero liability) will apply in both cases.And if accepted as self employed she would have no net liability anyway(may be excused from filing returns).

I'd be more concerned if revenue came asking what she actually did on the farm say if there was no stock in the winter rather than the self employed aspect(but it's a common tactic once a child reaches 16 that they become employed(employee) in the farm to reduce the tax bill). But an accountant would be able/needed to guide as to what's acceptable not only in terms of employing your mother (PAYE preferable for SW purposes) but tax planning with regard offsetting farm losses against PAYE,reclaiming vat and provide help/cover in case a revenue audit.

Also if your paying by cheque or bank transfer there will be a clear audit trail so there'll be no question of where did cash come from. Your making it sound like the source of cash (DAS, Sfp,sales) is illegitimate or money laundered but in reality there would be no questionable black whole.

Thanks Donegal11 this makes since. I could just employ her from March to November when I have stock on farm. Set a weekly or mothly direct debit from my farm a/c. I buy weanlings and sell as stores. No feeding or keeping animals over winter.

Mother would herd, give out nuts etc. Farm profits would be approx 5k from sfp and maybe a 1000 from silage and 2000 from cattle sales. So if I pay mother 30 euro a week and do some investment in farm it would reduce tax bill.

Could see revenue having a problem if I made a loss every year. Surely this wouldn't be allowed?

I think I need to visit an accountant. Thanks for all your help.