This is a favourite bit of advice from ‘Dave at the pub’ and he may well be right as it reduces the corporation tax that you pay. If your spouse works in your business, then it would be right and fair to pay them for that work. Remember that all expenses must be ‘wholly and necessarily for the purposes of business’ so, if your spouse doesn’t work in your business, it could be fraudulent.
We always ask our clients to provide a realistic job description (if we do your bookkeeping then you can’t include this as one of their tasks! Nor can you claim diary management if you trade from a mobile phone and book all your own appointments) and an estimate of the number of hours worked. This should show that the salary is reasonable for the work they do. You should pay them at least minimum wage and deduct relevant employment taxes.
Please don’t try to claim that minor children are working in your business! There is separate legislation covering minors in the workplace and you will need to get authorisation from their school and the local council as well as your insurance company.
Save corporation tax, pay PAYE/NI