Getting employer to open trust for children

[Somewhatfoolish]

Is there any simple means - if you're not a gazillionaire with the cash to pay for all sorts of cunning schemes - to instead/in addition to a payrise have your employer pay a trust for your kids in some kind of tax efficient way?

[Macron]

Why would your employer be paying your children?

[E63eeeeee...]

Vietnamese sweat shop?

[RUSTILLDOWN]

Somewhatfoolish said:

Is there any simple means - if you're not a gazillionaire with the cash to pay for all sorts of cunning schemes - to instead/in addition to a payrise have your employer pay a trust for your kids in some kind of tax efficient way?

Name lives up to reality!

[iphonedyou]

RUSTILLDOWN said:

Name lives up to reality!

Peak employee entitlement right here.

[DaveA8]

They might if they fancy a nice Aspect enquiry from HMRC and even if that doesn't put them off, the fact that it's your income means it's taxed as your income and the only people who will do well are the Trust providers because if they touched the scheme and that's questionable, it would be without any liability.
For many years I thought I was clever and but realised 99% of schemes I thought of had been tried by smarter people than me and if they work have a very short shelf life.
I did the old cars via a partnership years ago and that triggered an aspect enquiry sensing the fragility of my situation, I informed the HMRC officer that the partnership hadn't worked out so would be dissolving it. I came hear of someone on a neighbouring estate who toughed it out and adopted a very rigid approach.
They lost at a tribunal and the combined amounts were in the hundreds of thousands.

[Somewhatfoolish]

Macron said:

Why would your employer be paying your children?

My theory was that it might not count as my personal income, since I wouldn't be able to touch it.

Oh well.

[deckster]

Somewhatfoolish said:

Macron said:

Why would your employer be paying your children?

My theory was that it might not count as my personal income, since I wouldn't be able to touch it.

Oh well.

So your employer, who you do work for, gives you a big pay cut and simultaneously makes a gift to your children, who don't work for your employer, of the same amount, out of the goodness of their hearts?

Sounds legit. HMRC wouldn't smell any kind of rat at all.

[AdamV12V]

Best PH finance thread of the year award goes to....

I sometimes wonder how people get through their day, let alone hold down a job!

[Somewhatfoolish]

deckster said:

Somewhatfoolish said:

Macron said:

Why would your employer be paying your children?

My theory was that it might not count as my personal income, since I wouldn't be able to touch it.

Oh well.

So your employer, who you do work for, gives you a big pay cut and simultaneously makes a gift to your children, who don't work for your employer, of the same amount, out of the goodness of their hearts?

Sounds legit. HMRC wouldn't smell any kind of rat at all.

The intent wasn't tax evasion, it was tax avoidance, an employee perk essentially. A bit like providing day care.

My theory may not make sense but since I don't know much about tax that isn't surprising. The idea that since it doesn't benefit me personally it may have favourable tax treatment isn't intrinsically barking.

[iphonedyou]

Somewhatfoolish said:

The intent wasn't tax evasion, it was tax avoidance, an employee perk essentially. A bit like providing day care.

My theory may not make sense but since I don't know much about tax that isn't surprising. The idea that since it doesn't benefit me personally it may have favourable tax treatment isn't intrinsically barking.

Well no. But your suggestion was intrinsically barking.

[CharlesElliott]

Unfortunately what you are suggesting would be tax evasion, given that the only purpose would be to avoid the correct taxation. Your children are not contributing to the work that you do, so there is no basis to do as you suggest.

[deckster]

CharlesElliott said:

Unfortunately what you are suggesting would be tax evasion, given that the only purpose would be to avoid the correct taxation.

That's not entirely right. Tax avoidance and tax evasion both have the express purpose of avoiding paying what might be considered to be the "correct" amount (which is a weasel term only employed by HMRC). It's just that tax avoidance is legal and tax evasion isn't.

[CharlesElliott]

deckster said:

CharlesElliott said:

Unfortunately what you are suggesting would be tax evasion, given that the only purpose would be to avoid the correct taxation.

That's not entirely right. Tax avoidance and tax evasion both have the express purpose of avoiding paying what might be considered to be the "correct" amount (which is a weasel term only employed by HMRC). It's just that tax avoidance is legal and tax evasion isn't.

Fair enough, but I think the point was clear. I'll be explicit.

Unfortunately what you are suggesting would be tax evasion, given that the only purpose would be to illegally avoid the correct taxation.

[Somewhatfoolish]

CharlesElliott said:

deckster said:

CharlesElliott said:

Unfortunately what you are suggesting would be tax evasion, given that the only purpose would be to avoid the correct taxation.

That's not entirely right. Tax avoidance and tax evasion both have the express purpose of avoiding paying what might be considered to be the "correct" amount (which is a weasel term only employed by HMRC). It's just that tax avoidance is legal and tax evasion isn't.

Fair enough, but I think the point was clear. I'll be explicit.

Unfortunately what you are suggesting would be tax evasion, given that the only purpose would be to illegally avoid the correct taxation.

No it wouldn't, because it would only be done in a legal way. Now it seems that the unanimous consensus is that doing this is pointless from a tax POV but I don't see anything wrong with the principle of having an employer contribute to trusts for your kid(s) and indeed it's very much in the spirit of the kind of things my CEO would do as a family man.

IE it wouldn't be fraudulent employment, heck my kids don't even start existing until November.

[CharlesElliott]

Somewhatfoolish said:

CharlesElliott said:

deckster said:

CharlesElliott said:

Unfortunately what you are suggesting would be tax evasion, given that the only purpose would be to avoid the correct taxation.

That's not entirely right. Tax avoidance and tax evasion both have the express purpose of avoiding paying what might be considered to be the "correct" amount (which is a weasel term only employed by HMRC). It's just that tax avoidance is legal and tax evasion isn't.

Fair enough, but I think the point was clear. I'll be explicit.

Unfortunately what you are suggesting would be tax evasion, given that the only purpose would be to illegally avoid the correct taxation.

No it wouldn't, because it would only be done in a legal way. Now it seems that the unanimous consensus is that doing this is pointless from a tax POV but I don't see anything wrong with the principle of having an employer contribute to trusts for your kid(s) and indeed it's very much in the spirit of the kind of things my CEO would do as a family man.

IE it wouldn't be fraudulent employment, heck my kids don't even start existing until November.

But what would be the 'legal way' in which your employer could contribute to your kids?

[Jawls]

Somewhatfoolish said:

deckster said:

Somewhatfoolish said:

Macron said:

Why would your employer be paying your children?

My theory was that it might not count as my personal income, since I wouldn't be able to touch it.

Oh well.

So your employer, who you do work for, gives you a big pay cut and simultaneously makes a gift to your children, who don't work for your employer, of the same amount, out of the goodness of their hearts?

Sounds legit. HMRC wouldn't smell any kind of rat at all.

The intent wasn't tax evasion, it was tax avoidance, an employee perk essentially. A bit like providing day care.

My theory may not make sense but since I don't know much about tax that isn't surprising. The idea that since it doesn't benefit me personally it may have favourable tax treatment isn't intrinsically barking.

If your intention is to forego a benefit now in a tax efficient way so that your kids benefit, you could salary sacrifice massive amounts into your pension, with the intent that you won’t live off a DC pension in retirement (you’d need an alternative vehicle for funding retirement). You die, kids inherit pension, job done. You’d get tax relief on the way in.

That is equivalent to you giving up salary so that kids benefit, just with pretty restrictive access requirements (you need to be dead)

I wouldn’t do it, but it’s not an intrinsically terrible idea.

[Panamax]

No. You are taxed on anything that arises from your employment, however it may be dressed-up. An easy example is if your employer were to pay the kids' school fees.

But, of course, if you were an MP or a builder you would "employ" your wife/partner on an incredibly tax-efficient salary to keep things ticking along.

[Somewhatfoolish]

Jawls said:

Somewhatfoolish said:

deckster said:

Somewhatfoolish said:

Macron said:

Why would your employer be paying your children?

My theory was that it might not count as my personal income, since I wouldn't be able to touch it.

Oh well.

So your employer, who you do work for, gives you a big pay cut and simultaneously makes a gift to your children, who don't work for your employer, of the same amount, out of the goodness of their hearts?

Sounds legit. HMRC wouldn't smell any kind of rat at all.

The intent wasn't tax evasion, it was tax avoidance, an employee perk essentially. A bit like providing day care.

My theory may not make sense but since I don't know much about tax that isn't surprising. The idea that since it doesn't benefit me personally it may have favourable tax treatment isn't intrinsically barking.

If your intention is to forego a benefit now in a tax efficient way so that your kids benefit, you could salary sacrifice massive amounts into your pension, with the intent that you won’t live off a DC pension in retirement (you’d need an alternative vehicle for funding retirement). You die, kids inherit pension, job done. You’d get tax relief on the way in.

That is equivalent to you giving up salary so that kids benefit, just with pretty restrictive access requirements (you need to be dead)

I wouldn’t do it, but it’s not an intrinsically terrible idea.

Thank you - that's a very interesting idea. Indeed one of the other things I am intending to discuss with my employer is going beyond the auto enrolement minimum which is all they do, both the % matched and more importantly the cap.

[Macron]

As soon as your kid does exist you can pay into a pension for them, and get relief (albeit at 20% only) on the first £3600, so you'd be putting £2880 of your own post-tax earnings into a wrapper for them, and the wrapper would receive the additional 720 basic relief.

If you put your own earnings into your own pension you might be able to get effectively more tax back, and as you are indicating an allergy to paying tax, which is fine, no one wants to pay it, it may be best to start there first.

The 60% tax rate thread also shows some folk with ideas to avoid paying tax, which is the legal version, and I'm sure Junior would rather you were at liberty to help educate them on appropriate differences than the evasion type, so that's also worth a look.