Farm accounts question: Can a farmers son be put down as an employee on accounts?

Farmer_3650

Brother in law has a son in Agricultural College. He works long hours on the farm all year round and gets payed by his father. His father wants to put his wages down in the accounts, as he is trying to keep accounts down to get susi grant, but the accountant is telling him that it can't be done. Is this correct?

whelan2

I dont think you can back date it now. You have to do it in realtime. I have my son going through the books and pay the revenue whatever I owe them every 3 months.

Mooooo

As Whelan said, should have been going thru the books the whole time. Accountant should have advised that early on I would have thought

Farmer_3650

Mooooo wrote: »

As Whelan said, should have been going thru the books the whole time. Accountant should have advised that early on I would have thought

I'll say it to them for next year, I think they are going to that accountant for a while though.

whelan2

I have my kids going through the books a few years now. He really should get onto it straight away.

duffysfarm

yes, the accountant should have advised him of this early on if he knew there was a son working there. if he didnt know then we cant blame the accountant

Mooooo wrote: »

As Whelan said, should have been going thru the books the whole time. Accountant should have advised that early on I would have thought

Grueller

What age can you start paying them a wage? My two are young but since the bull came out they go get the cows every evening and do loads of odd jobs. I would like to put a few quid into a locked account for them that they can access when they are going away to 3rd level.

alps

Yes,part time from 14 to 15, with provisions for time off. The time that they are allowed to work increases as they get older.

https://www.citizensinformation.ie/en/employment/starting_work_and_changing_job/young_people_at_work/rights_of_young_workers.html

Mooooo

Grueller wrote: »

What age can you start paying them a wage? My two are young but since the bull came out they go get the cows every evening and do loads of odd jobs. I would like to put a few quid into a locked account for them that they can access when they are going away to 3rd level.

14 I think, limited by number of hours legally allowable I think, increase then at 16 and again at 18 or something like that. Has to be done in real time. Worth mentioning to accountant anyway

KAMG

Farmer_3650 wrote: »

Brother in law has a son in Agricultural College. He works long hours on the farm all year round and gets payed by his father. His father wants to put his wages down in the accounts, as he is trying to keep accounts down to get susi grant, but the accountant is telling him that it can't be done. Is this correct?

Nothing wrong with putting the young lad through as wages. Although, as previously stated by others, it has to be done in real time since Jan 2019.

As regards, lowering profits for SUSI, this wont work as family wages have to be added back when computing profit for SUSI. To conclude, its tax efficient but not gonna help re college grants.

Farmer_3650

KAMG wrote: »

Nothing wrong with putting the young lad through as wages. Although, as previously stated by others, it has to be done in real time since Jan 2019.

As regards, lowering profits for SUSI, this wont work as family wages have to be added back when computing profit for SUSI. To conclude, its tax efficient but not gonna help re college grants.

I think he is able to earn up to 4000 per year without it being considered, thats the way it was 5 years ago when I was in college.

nhg

You can pay up to €40 per week directly into their bank account without having to register as an employer with Revenue.

Acquiescence

Brightpay.ie have free payroll software if you only have one employee.

It's fairly intuitive and links with your ROS account.

Panch18

Can't you give a gift of under 3,000 per year every year to a child which is exempt from tax? Now the kid (of any age) wouldn't be getting the stamps on it and it wouldn't be tax deductible for the parent - but as a means of transferring money to next generation if you did it every year it wouldn't be long giving them a nice deposit for a house or something

this from revenue would seem to indicate so:

https://www.revenue.ie/en/gains-gifts-and-inheritance/documents/cat-treatment-receipts-by-children.pdf

1.2 Small Gift Exemption.
In addition to this €335,000 tax-free threshold, the first €3,000 of gifts to a child in any year is
exempt from CAT under the annual small gifts exemption. This means that each parent can
give a gift to a value of €3,000 to a child (or to anyone else) each calendar year without any
CAT charge arising. Two parents can make gifts to a child to the value of €6,000 in any year
free of CAT. Indeed, two parents could, if they wished, gift €12,000 in total each year to each
son or daughter and their respective partner (e.g. fiancée, fiancé, daughter-in-law, son-in-law)
free of CAT.
There is no obligation on a beneficiary of a gift to spend it in the year it is received. Gifts can
be accumulated by the child after receipt to meet future expenditure e.g. to meet a deposit on
a house.
Gifts which qualify for the small gifts exemption do not reduce the parent to child tax–free
threshold of €335,000 – gifts in exces

KAMG

Panch18 wrote: »

Can't you give a gift of under 3,000 per year every year to a child which is exempt from tax? Now the kid (of any age) wouldn't be getting the stamps on it and it wouldn't be tax deductible for the parent - but as a means of transferring money to next generation if you did it every year it wouldn't be long giving them a nice deposit for a house or something

this from revenue would seem to indicate so:

https://www.revenue.ie/en/gains-gifts-and-inheritance/documents/cat-treatment-receipts-by-children.pdf

1.2 Small Gift Exemption.
In addition to this €335,000 tax-free threshold, the first €3,000 of gifts to a child in any year is
exempt from CAT under the annual small gifts exemption. This means that each parent can
give a gift to a value of €3,000 to a child (or to anyone else) each calendar year without any
CAT charge arising. Two parents can make gifts to a child to the value of €6,000 in any year
free of CAT. Indeed, two parents could, if they wished, gift €12,000 in total each year to each
son or daughter and their respective partner (e.g. fiancée, fiancé, daughter-in-law, son-in-law)
free of CAT.
There is no obligation on a beneficiary of a gift to spend it in the year it is received. Gifts can
be accumulated by the child after receipt to meet future expenditure e.g. to meet a deposit on
a house.
Gifts which qualify for the small gifts exemption do not reduce the parent to child tax–free
threshold of €335,000 – gifts in exces

Thats 100% correct. But it is not a tax deductable expense with Revenue.

KAMG

Farmer_3650 wrote: »

I think he is able to earn up to 4000 per year without it being considered, thats the way it was 5 years ago when I was in college.

Your mixing things up here. Students can earn a certain amount during holiday time with a 3rd party employer that isn't included in SUSI calculations. That could be the €4,000 figure. Its around this amount anyway.

But family wages to a dependent child are definitely not allowed to be used to reduce a parents income for SUSI. It is allowed to reduce profits for Revenue however.

Stratvs

Farmer_3650 wrote: »

Brother in law has a son in Agricultural College. He works long hours on the farm all year round and gets payed by his father. His father wants to put his wages down in the accounts, as he is trying to keep accounts down to get susi grant, but the accountant is telling him that it can't be done. Is this correct?

Irrespective of the SUSI issue if the son is working on the farm and is being paid for the work done then it makes sense to have him on the books. From a tax planning perspective savings of up to 40% in tax+PRSI+USC on the parents side could be achieved with little liability on the son's side once the earnings don't exceed his tax credits.

I find it a little odd that this wasn't mentioned up to now by the accountant. It's the sort of thing that I'd always be on the lookout for and ask the client about when children get to appropriate age. As it is anything done can only be from now on as others have said.The admin is not major for just one employee and if the accountant has a payroll service they may even do it. The additional cost is deductible anyway.

KAMG

Stratvs wrote: »

Irrespective of the SUSI issue if the son is working on the farm and is being paid for the work done then it makes sense to have him on the books. From a tax planning perspective savings of up to 40% in tax+PRSI+USC on the parents side could be achieved with little liability on the son's side once the earnings don't exceed his tax credits.

I find it a little odd that this wasn't mentioned up to now by the accountant. It's the sort of thing that I'd always be on the lookout for and ask the client about when children get to appropriate age. As it is anything done can only be from now on as others have said.The admin is not major for just one employee and if the accountant has a payroll service they may even do it. The additional cost is deductible anyway.

I fully agree. It's pretty poor from the op's accountant.

lakill Farm

wages paid to family members is added back in SUSI calculations

Better off if the son invoiced the father for the work and declared the income himself as that's not seen as wages in SUSI eyes

Farmer_3650 wrote: »

Brother in law has a son in Agricultural College. He works long hours on the farm all year round and gets payed by his father. His father wants to put his wages down in the accounts, as he is trying to keep accounts down to get susi grant, but the accountant is telling him that it can't be done. Is this correct?

Stratvs

lakill Farm wrote: »

wages paid to family members is added back in SUSI calculations

Better off if the son invoiced the father for the work and declared the income himself as that's not seen as wages in SUSI eyes

It might not be seen as wages in SUSI's eyes but would it not then be considered self-employed earnings of the applicant instead which ought to be declared to SUSI?

Separately, if the son is under the normal control, direction and supervision of the father and using the father's equipment etc. in his work on the farm and not providing the same services to anyone else with appropriate insurance etc. how does he prove to be self-employed under a Contract for Services rather than an employee?

lakill Farm

Stratvs wrote: »

It might not be seen as wages in SUSI's eyes but would it not then be considered self-employed earnings of the applicant instead which ought to be declared to SUSI?

Separately, if the son is under the normal control, direction and supervision of the father and using the father's equipment etc. in his work on the farm and not providing the same services to anyone else with appropriate insurance etc. how does he prove to be self-employed under a Contract for Services rather than an employee?

There are employment test cases in law like Cadburys at the time but nothing stopping the son subcontracting out to other farmers around the odd time

KAMG

lakill Farm wrote: »

wages paid to family members is added back in SUSI calculations

Better off if the son invoiced the father for the work and declared the income himself as that's not seen as wages in SUSI eyes

This is ridiculous advice with all due respect. You want an 18 year old to register for income tax just so he can avoid the addback of family wages when applying for a college grant. Forgetting the fact that its still income and would need to included as such in any case. Next thing you will say I suppose is cant he claim expenses etc against the income Like accountants fees.

Farmer_3650

Stratvs wrote: »

Irrespective of the SUSI issue if the son is working on the farm and is being paid for the work done then it makes sense to have him on the books. From a tax planning perspective savings of up to 40% in tax+PRSI+USC on the parents side could be achieved with little liability on the son's side once the earnings don't exceed his tax credits.

I find it a little odd that this wasn't mentioned up to now by the accountant. It's the sort of thing that I'd always be on the lookout for and ask the client about when children get to appropriate age. As it is anything done can only be from now on as others have said.The admin is not major for just one employee and if the accountant has a payroll service they may even do it. The additional cost is deductible anyway.

Maybe its a case that they only asked the accountant if its worth doing for the SUSI and never asked if it was worth doing to save on tax. Regardless, the accountant should still have mentioned it to them, as it sounds like its crazy not having him in the books. I wouldn't mind but he's seen as one of the best accountants around. I'll be passing all the information from this forum onto the brother in law and I'll get the exact details of what the accountant said. Thanks for your informative reply.

Farmer_3650

KAMG wrote: »

Your mixing things up here. Students can earn a certain amount during holiday time with a 3rd party employer that isn't included in SUSI calculations. That could be the €4,000 figure. Its around this amount anyway.

But family wages to a dependent child are definitely not allowed to be used to reduce a parents income for SUSI. It is allowed to reduce profits for Revenue however.

Thanks for your many informative replies. How would you go about registering a child as an employee? I was also reading an online article with the link below, which stated that he can earn a total of €8,250 without being taxed, would that be correct? The lad in question is working for an Agricultural Contractor for the summer, but I'm not sure if that is going through the books or not, it was all cash in hand when I was at it a few years ago. Thanks again.
https://www.independent.ie/business/farming/agri-business/substantial-tax-reliefs-available-for-employing-farm-family-members-34434369.html

Stratvs

Farmer_3650 wrote: »

Thanks for your many informative replies. How would you go about registering a child as an employee? I was also reading an online article with the link below, which stated that he can earn a total of €8,250 without being taxed, would that be correct? The lad in question is working for an Agricultural Contractor for the summer, but I'm not sure if that is going through the books or not, it was all cash in hand when I was at it a few years ago. Thanks again.

Registration is via ROS. Payroll packages for one employee are cheap or the accountant may have a payroll service that they would do it (deductible expense).

Personal tax credit is €1,650 so that's €8,250 at 20%. If total income under that no tax. In certain circumstances the child employed by a parent may also be entitled to the employee tax credit which is a further €1,650 so potentially €16,500 before tax. However to get that extra credit against the parents employment the employment must be full-time or if the child has another employment not connected with the parent it would be available for that. So potentially up to €8,250 from parent and up to €8,250 from another employer before tax.

This is an interesting article though a few years old.
https://www.independent.ie/business/farming/agri-business/how-employing-family-members-on-farm-can-deliver-substantial-tax-savings-35466386.html

lakill Farm

KAMG wrote: »

This is ridiculous advice with all due respect. You want an 18 year old to register for income tax just so he can avoid the addback of family wages when applying for a college grant. Forgetting the fact that its still income and would need to included as such in any case. Next thing you will say I suppose is cant he claim expenses etc against the income Like accountants fees.

How ridiculous is it really?

2 issues ; payroll wasn't complete when it was suppose to.
: farm wants to pay son remuneration for tax and to benefit SUSI
(BTW susi initial closing dates were 6/7 weeks ago)

so how ridiculous is it really if its satisfying all the requirements? or indeed what is your suggestion? and what is accountancy fees got to do with it.

duffysfarm

To suggest that a son registers for income tax and invoices his parents for work done on a farm is one of the most ludicrous suggestions i have ever heard. If you had a revenue audit or nera inspection they would rip tou to shreds.

KAMG wrote: »

This is ridiculous advice with all due respect. You want an 18 year old to register for income tax just so he can avoid the addback of family wages when applying for a college grant. Forgetting the fact that its still income and would need to included as such in any case. Next thing you will say I suppose is cant he claim expenses etc against the income Like accountants fees.

lakill Farm

duffysfarm wrote: »

To suggest that a son registers for income tax and invoices his parents for work done on a farm is one of the most ludicrous suggestions i have ever heard. If you had a revenue audit or nera inspection they would rip tou to shreds.

Oh and paying the son for long hours and not registering him on payroll will be ok ?

duffysfarm

we are not talking about been fair, many things in life are not fair. we are talking about complying with tax law and legislation and giving proper sound advice. As per the Revenue Code of Conduct for Determining employment or self employment status of individuals https://www.revenue.ie/en/self-assessment-and-self-employment/documents/code-of-practice-on-employment-status.pdf
i think you will find better guidance there!

lakill Farm wrote: »

Oh and paying the son for long hours and not registering him on payroll will be ok ?

KAMG

lakill Farm wrote: »

Oh and paying the son for long hours and not registering him on payroll will be ok ?

If the son is working 'long hours' as you call it, I would be really surprised if he isnt getting paid. Otherwise he is a fool. There is a big difference between working a few hours the odd weekend to help out your parents on the farm and working 24/7. If the son is off to college, I could imagine he is only doing a few hours here and there.

K.G.

lakill Farm wrote: »

wages paid to family members is added back in SUSI calculations

Better off if the son invoiced the father for the work and declared the income himself as that's not seen as wages in SUSI eyes

Is it just the previous accounting year they look at or do they go back further

Farmer_3650

KAMG wrote: »

If the son is working 'long hours' as you call it, I would be really surprised if he isnt getting paid. Otherwise he is a fool. There is a big difference between working a few hours the odd weekend to help out your parents on the farm and working 24/7. If the son is off to college, I could imagine he is only doing a few hours here and there.

He wouldn't be working very long hours. He'd only be home weekends sept-may and then he's working most days for an agri contractor during the summer. I'd say an avg of 10-15hrs/week would be the height of it.

Sugarbowl

duffysfarm wrote: »

To suggest that a son registers for income tax and invoices his parents for work done on a farm is one of the most ludicrous suggestions i have ever heard. If you had a revenue audit or nera inspection they would rip tou to shreds.

What’s the problem with doing this? I know someone who has this setup. The son looks after their own tax through the accountant. The father pays the wages out of the farm account. The accountant suggested it. They have had no problem with it, and the son gets recognized for his work done.

duffysfarm

the tax system in Ireland is largely self assessment in that tax payers are responsible for their own tax affairs and Revenue do not check everything so the fact that one person does one thing does not mean that they are right as nobody may have checked it. a tax payer may get away with doing something wrong for a long time before it is ever checked, even a lifetime. take a look at the revenue press releases every quarter where they release the names address and details of persons who break the tax laws, default on taxes etc.

At the same time every case may be different - a son may be a part time farmer and part time fencing contractor and in that case he would invoice for his work as he is using his own tools, buys his own materials, responsible for his own hours, has more that one customer etc. just because they are a son doesnt mean that they have to be on payroll.
however given the details provided by the op - a son who is at college is and is working for only one person for a set number of hours each week and not supplying any tools or equipment is very unlikely to be self employed.
if anyone could register as self employed and invoice for their work then every employer in the country would sack their employers and tell them to go self employed.
one other thing to consider - would anyone here as a parent like to see their son or daughter been asked to register as self employed and not be treated as an employee and protected by the relevant legislation? no holiday pay, no bank holiday pay, no sick pay, no redundancy entitlements, no statutory entitlements?

Sugarbowl wrote: »

What’s the problem with doing this? I know someone who has this setup. The son looks after their own tax through the accountant. The father pays the wages out of the farm account. The accountant suggested it. They have had no problem with it, and the son gets recognized for his work done.

relax carry on

nhg wrote: »

You can pay up to €40 per week directly into their bank account without having to register as an employer with Revenue.

Can I ask where is that coming from as Revenues own instructions seem to contradict that. A farm laborer is not a domestic employee.

https://www.revenue.ie/en/employing-people/becoming-an-employer-and-ongoing-obligations/registration-of-employers-for-paye-purposes/index.aspx

You must register as an employer if you pay your employee more than:

€8 per week (or €36 per month), if they are full time employees
€2 per week (or €9 per month), if they have other employment(s).

Tonynewholland

duffysfarm wrote: »

the tax system in Ireland is largely self assessment in that tax payers are responsible for their own tax affairs and Revenue do not check everything so the fact that one person does one thing does not mean that they are right as nobody may have checked it. a tax payer may get away with doing something wrong for a long time before it is ever checked, even a lifetime. take a look at the revenue press releases every quarter where they release the names address and details of persons who break the tax laws, default on taxes etc.

At the same time every case may be different - a son may be a part time farmer and part time fencing contractor and in that case he would invoice for his work as he is using his own tools, buys his own materials, responsible for his own hours, has more that one customer etc. just because they are a son doesnt mean that they have to be on payroll.
however given the details provided by the op - a son who is at college is and is working for only one person for a set number of hours each week and not supplying any tools or equipment is very unlikely to be self employed.
if anyone could register as self employed and invoice for their work then every employer in the country would sack their employers and tell them to go self employed.
one other thing to consider - would anyone here as a parent like to see their son or daughter been asked to register as self employed and not be treated as an employee and protected by the relevant legislation? no holiday pay, no bank holiday pay, no sick pay, no redundancy entitlements, no statutory entitlements?

Aren’t the highest paid people in RTÉ all in company setups. I don’t see why a farmers son/daughter couldn’t invoice for work done on the farm as a sole trader or otherwise

There are thousands of people contracting in the likes if IT that only work for one company too.

duffysfarm

they have all set up limited companies which for some strange reason makes it acceptable to revenue

Vivian Mysterious Stack wrote: »

There are thousands of people contracting in the likes if IT that only work for one company too.

Dinzee Conlee

Tonynewholland wrote: »

Aren’t the highest paid people in RTÉ all in company setups. I don’t see why a farmers son/daughter couldn’t invoice for work done on the farm as a sole trader or otherwise

Would they have to have their own insurance then?

Tonynewholland

Dinzee Conlee wrote: »

Would they have to have their own insurance then?

Not sure what insurance would be needed from their side

AndrewJRenko

Tonynewholland wrote: »

Aren’t the highest paid people in RTÉ all in company setups. I don’t see why a farmers son/daughter couldn’t invoice for work done on the farm as a sole trader or otherwise

Those lads and lassies in RTE would all have considerable private work - public appearances, compere for commercial awards events, voiceover work.

893bet

Dinzee Conlee wrote: »

Would they have to have their own insurance then?

Insurance is nothing to do with revenue.

Dinzee Conlee

893bet wrote: »

Insurance is nothing to do with revenue.

I know that, it was more asking if that was something they needed to consider if they went down the sole trader route vs the employee route...

Tony above indicated it isn’t an issue.

Maybe the farm insurance covers them? I think it would be worth checking out. No point in trying to save a few quid only to discover you aren’t covered adequately if something did go very wrong...

Mooooo

You set the farm insurance to cover what ever amount of labour is going to be on the farm, regardless if it's direct employee or someone working as a sole trader