After a week, Tony realises he’s making enough money to start paying Carol a wage for the hours she puts in at the bakery.
Next month, Tony’s accountant calls. He wants to know why Tony’s wage bill is higher. When he finds out about Carol, the accountant tells Tony he’ll have to make sure everything is above board.
Carol must have the same employment and tax benefits and obligations as his other employees, including a signed employment agreement. Fortunately, Tony has already been deducting PAYE from Carol’s wages, so can give his accountant the correct figures for the month’s employee monthly schedule.
Tony also needs Inland Revenue’s (IR) approval to claim Carol’s wages as an expense in his tax return — he must contact IR with enough information to show her wages are genuinely paid for work done for Tony’s business.
While it’s a bit of a hassle, Tony is happy he won’t be penalised by IR in the future.