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Setting up a business without boss knowing...

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sjwright | 16:01 Tue 11th May 2010 | Business & Finance
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Hi

I'm self-employed so the advice I can offer my brother on this is limited. Basically he wants to set up a business in the design sector. He doesn't want to leave his current employer until the point where a stable wage can be achieved through the new business.

Am I right in thinking that he could set up a business without claiming a wage (any money earned belongs wholly to the business and nothing to him) and continue to work for his current employer, paying the same tax?

I'm guessing his boss would find out if his tax code changed due to the second income, so if he doesn't claim a second income, his tax class remains the same, and he won't be found out?

Any advice would be received with gratitude.

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If he sets up a business that isn't a company then any profit falls taxable on him come what may, regardless of whether he takes it out or not. However, yes, he could set up a company and not pay himself anything initially. If he's named as a director and shareholder though then that information is publicly available and if the boss had any reason to actually look...
16:54 Tue 11th May 2010
If he sets up a business that isn't a company then any profit falls taxable on him come what may, regardless of whether he takes it out or not. However, yes, he could set up a company and not pay himself anything initially. If he's named as a director and shareholder though then that information is publicly available and if the boss had any reason to actually look then he'd see it.

The Revenue will allocate all your tax code to any one particular employment anyway though so even were he earning thousands from the other business, there's no reason it necessarily has to affect his tax code at his present job as a matter of course. Even if it did, the reasons why someone's tax code changes are none of his employer's business. The employer isn't told why it has changed, just that it has done so and what it's changed to.

However, all of that said, I would have thought it was almost certainly in your brother's employment contract that his employers have to be told if he takes on a second job anywhere. Furthermore, depending on how important he actually is, there may actually be a restrictive covenant preventing him from working in the same industry for himself within a designated time and distance. He would almost certainly be in breach of his own contract to act in such a secretive manner. The legal ramifications of that? No idea, over to the employment law experts. Buildersmate is good on that sort of thing.

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