Replies to Queries -- 1

I am an accountant in industry and a 40 per cent taxpayer. My wife is a self-employed accountant with a small annual income after expenses of around £4 500. I help within the practice (accounts tax returns etc.).

If I take over the practice and employ my wife I would pay her a £4 500 salary. In addition if I supplied a company car (new cost say £7 000) this should be tax free as the additional benefit of £2 450 (£7 000 x 35 per cent) would leave remuneration at below £8 500 per annum. The practice would yield a small accounts profit which would become a tax loss after capital allowances giving a 40 per cent tax saving against my pay-as-you-earn income.

Could the Inspector challenge such an arrangement on any of the following...