Paying tuition fees without paying tax

Why not change the business (or the setup at amazon or whatever) so its all in your sons name (not _just_ the cheques), and the cheques are directly paid to him?

Your income from an affiliated website is still yours, no matter whom you pay the cheque into. You cannot escape income tax by diverting it in this way. In the past you could take out a deed of covenant for your son to save tax, but this has been abolished. Is there any way in which you could pass your 'business' to your son? Or to your wife, if she is non-tax paper or on standard rate?

Alec

Surely they could gift the beneficial interest in the business to their son. Then all income from it would be his, and taxed as his.

a hobby? does it still count at being self employed?

Could be CGT implications.

And if he is under 18, it could ineffective for income tax purposes.

Wife as a partner in the business?

In general yes, but unlikely in this instance, as it appears to be an essentially capital-free business.

Indeed, but unless he's one of those prodigies who go straight from nappies to university, that won't be an issue. The OP implied that the arrangement would not be put in place until he starts.

Is it a limited company? If so, make your son a shareholder and pay him a dividend.

And/Or make him do some work and pay him a salary - below 4k p.a. there will be no NIC.

Children should earn the costs of their education if this can be arranged - what's the point in the parent paying 40% tax whent he child's personal allowance is wasted?

yes,

But in gereral, the IR turn a blind eye as they know that the people who do 'hobby' jobs don't know of all the expenses that they can claim against the income.

If pushed to find out, it is quite likely that the 'hobby' job will actually make a loss and should the enterprice ever become fully commercial this loss can be offset against tax and the IR will be in nett loss.

Note that as it's a 'hobby' job, a request to offset any loss against employed income will be refused so that point is moot.

tim

That's more or less what I thought of doing, but someone told me that it wouldnt work because the IR would say that since I set the site up myself and my son is a dependant - that it would be hard to argue the point.

I dont run it as a "business" in any formal sense. Would there be advantages in doing so?

Also: My son isnt 18 yet but will be by the time he goes to university.

No - not a company at all. Just a few page on a web server (minimal capital - if any).

Exactly my thoughts! But the question is how BEST to do this. Maybe I need to look into the idea of turning into a limited company - but (I'm a total novice here) I guess that this option is not total devoid of costs.

No, just put everything in it into his name, as if its him doing it, not you.

As this is effectively a hobby for you (it would appear) I wonder if you have to declare your income in this respect? Does anyone know what the rules are on hobbies, or are you meant to declare all income however small? For sake of argument, If I sold 1/2 my stamp collection for 100, do I have to declare that?

How are they going to know?! Lets say you have decided to stop doing it from now on, and your son has decided to start, carrying on from where you left off.

The usual IR "rule" is that hobbies which make losses are not trades and thus no relief due, and hobbies which make profits are taxable. :)

It would likely be a CGT item - unless you were in the habit of buying & selling stamp collections.

If it is making money on a regular basis, you may need to formalise this activity, including registering self-employment with the IR, if appropriate - 100 penalty for failure to do is.

What would be the treatment of "mixed" hobbies, i.e. those in which some activities could conceivably be considered a trade because they involve money changing hands, and other activities do not?

The example I have in mind is musicians, who mainly get together to play in ensembles for their own enjoyment, in fact even joining clubs which involve payment *by* them of subscriptions to defray costs, but who occasionally get roped in to playing in low-budget productions which cannot afford to hire proper professional musicians. They get paid fees and expenses.

The question is, would this hobby activity be split into earning and non-earning parts, or would the whole lot be lumped together such that all the expenses involved in the non-earning part could offset fees from the earning part?

AFAIK you can only offset expenses which are necessary to make the profits, so you'd have to convince the IR that paying a subscription to a club was necessary to develop their skill, or something like that.

Well, with musicians, the skills need input of effort just to stay in one place, never mind developing them, so it could indeed be argued that taking part in such club activities is instrumental (sorry) in keeping one's standard up to scratch, and that therefore the expenses involved (subcriptions, travel) can arguably be judged necessary to make the profits. Also, being seen there also contributes to the likelihood of being asked to take part in paying gigs.

I was also thinking of common expenses affecting both the unpaid and paid proportions of the whole activity, such as consumables (strings, reeds, valve oil), insurance and overhauls of instruments, and of course capital allowances for the cost of their acquisition. These costs tend to add up to more than mere club subscriptions.

You have to declare all income. Selling your stamp collection doesn't provide income - though it might have capital gains tax implications.

We [the newsgroup] went through all this in the old ebay thread ...

Thom