Child Employment in an LTD?
Can You Legally Employ Your Child in a UK Limited Company?
Many directors of UK limited companies assume that child employment is either prohibited or only possible as part of an aggressive tax strategy. In reality, UK law does allow a limited company to employ a director’s child, provided the arrangement complies with employment law, safeguarding rules, company law obligations, and HMRC requirements.
This is not a loophole. It is a lawful employment relationship that must be structured and documented in the same way as any other role within the business, with additional protections because the employee is a minor. Where companies run into difficulty is not the concept itself, but the failure to treat the arrangement as genuine employment supported by proper legal documentation.
This article explains the legal framework that applies when a UK limited company employs a child, the compliance risks directors often overlook, and the documents required to demonstrate that the employment is lawful, proportionate, and defensible. It does not provide accounting or tax planning advice. Instead, it focuses on legal compliance and governance, which ultimately determine whether any financial benefit is sustainable.
For directors considering this option, the key question is not whether employing a child is permitted in principle, but whether the company can evidence that the role is real, appropriate, and properly documented.
The Legal Basis for Employing a Child in the UK
UK law does not prohibit children from working, but it regulates child employment closely. Any limited company employing a child must comply with a combination of employment law, child protection legislation, health and safety duties, and regulatory guidance. These rules apply regardless of whether the child is related to a director or shareholder.
The primary legal framework is found in the Children and Young Persons Act 1933, which sets the foundation for when and how children may work. This is supported by the Employment Rights Act 1996, which applies to employees of all ages, and by working time and health and safety regulations that impose additional obligations on employers of young workers. Local authority by-laws may also apply and, in some cases, require a child employment permit before work can begin.
From a company law perspective, employing a child is a corporate decision. Directors must act in the best interests of the company under the Companies Act 2006 and avoid arrangements that could be seen as artificial or unreasonable. Where the employee is a family member, this requires particular care, as directors must be able to justify the role, the duties, and the remuneration as commercially appropriate.
It is also important to distinguish between personal arrangements and employment by a limited company. A limited company is a separate legal entity. If it employs a child, that employment must be real, documented, and capable of standing up to scrutiny in the same way as any other employment relationship. Family connection does not reduce the legal standard; in practice, it raises it.
Minimum Age and Working Restrictions: What the Law Allows
A child may only be employed in the UK once they have reached the age of 13. Even then, the law places strict limits on the type of work that can be carried out and the hours that may be worked. These restrictions apply equally to limited companies and to family-run businesses.
Children may not work during school hours and are subject to maximum daily and weekly working limits, which are tighter during term time and more flexible during school holidays. Night work is prohibited, and rest breaks must be provided. Certain types of work are restricted or prohibited altogether, particularly where there is any risk to health, safety, or welfare.
In addition to national legislation, local authorities have the power to regulate child employment in their area. Many councils require a child employment permit or licence before a child can start work. The employer is responsible for checking whether a permit is required and for ensuring that any conditions attached to it are followed. Failure to obtain a required permit is a regulatory breach, not an administrative oversight.
For directors of limited companies, these rules are not optional. Breaching child employment restrictions can lead to enforcement action and can undermine the credibility of the employment arrangement as a whole. Proper planning and written records demonstrating compliance with age and working time limits are essential, particularly where the child is employed on a regular or ongoing basis.
Genuine Employment Requirement: Why Artificial Arrangements Fail
For a limited company to lawfully employ a child, the employment must be genuine. This means the child must carry out real work for the company, under direction or supervision, in return for pay that reflects the duties performed. An arrangement that exists only on paper, or where no meaningful work is undertaken, is unlikely to withstand scrutiny.
From a legal perspective, genuine employment is assessed by reference to substance rather than labels. Relevant factors include whether there are defined duties, whether the work is actually carried out, whether the child is supervised, and whether the company can evidence what the child does and when. Family relationships do not displace these requirements and may prompt closer examination rather than less.
Artificial arrangements create risk across several areas. HMRC may challenge the employment on the basis that it is not real, which can have wider implications beyond tax. From a company law perspective, directors may also be exposed if they cannot justify the arrangement as being in the company’s interests or if the remuneration is disproportionate to the work performed.
Proper documentation plays a central role in demonstrating that employment is genuine. A written contract, a clear job description, records of hours worked, and evidence of supervision all support the position that the role exists for business reasons. Without this evidence, the employment is vulnerable to challenge, regardless of how it is described.
Key Legal Documents Required to Employ Your Child Properly
Employing a child within a UK limited company requires a higher standard of documentation than a typical employment arrangement. This is because the company must be able to demonstrate not only that the role is genuine, but also that it complies with child employment law, safeguarding obligations, and corporate governance duties. Verbal arrangements or informal family understandings are insufficient and create significant legal risk.
The documents outlined below are not optional formalities. They are the primary evidence relied upon by HMRC, local authorities, and, where relevant, employment tribunals when assessing whether the arrangement is lawful. Proper documentation also protects directors by demonstrating that decisions were taken responsibly and in the interests of the company.
To support this process, LexDex Solutions provides a practical downloadable checklist setting out the core documents required when employing a child in a UK limited company. This checklist is designed to help directors ensure that the legal framework is documented clearly and consistently from the outset.
Employment Contract (Adapted for a Minor)
A written employment contract is a legal requirement, regardless of the employee’s age or family relationship to the directors. Where the employee is a child, the contract must be adapted to reflect the child’s legal status and the additional protections that apply to minors. Using a standard adult employment contract without modification is a common and avoidable mistake.
The contract should clearly define the role, duties, working hours, and rate of pay, with express limits that reflect statutory restrictions on child employment. Provisions dealing with working time, rest breaks, supervision, and termination must be age-appropriate and compliant with child employment law. Safeguarding considerations should also be addressed explicitly, particularly where the work involves access to systems, premises, or personal data.
From a legal perspective, the employment contract is one of the most important pieces of evidence that the arrangement is genuine. It demonstrates intention, structure, and compliance. In the absence of a properly drafted contract, the company will struggle to show that the employment relationship exists on lawful terms.
Job Description
A detailed job description is essential when employing a child, particularly in a family business context. It provides clarity about what the child is expected to do and supports the position that the role exists for legitimate business reasons rather than personal convenience.
The job description should set out specific tasks that are appropriate for the child’s age, skills, and level of supervision. Vague descriptions such as “general help” or “assisting the business” are unlikely to be persuasive if the arrangement is reviewed. The duties should be capable of being performed within permitted working hours and should align with the company’s actual operational needs.
In practice, a well-drafted job description supports several compliance objectives. It assists in assessing whether the pay is reasonable, helps demonstrate that the employment is genuine, and provides evidence that the company has considered suitability and risk. For directors, it is a key document in showing that the decision to employ a child was properly thought through.
Parental Consent and Safeguarding Documentation
Even where the parent is also a director of the company, written parental consent remains an important safeguard. It evidences that the child’s employment has been considered from a welfare and safeguarding perspective and that the parent has agreed to the nature of the work, the hours, and the conditions.
Safeguarding documentation should reflect the company’s awareness of its responsibilities when employing a minor. This may include written acknowledgements of supervision arrangements, conduct expectations, and procedures for raising concerns. While smaller companies may not have formal safeguarding policies, they are still expected to act reasonably and document their approach.
These documents are particularly relevant in the event of external scrutiny. Local authorities and regulators are concerned with child welfare as much as legal compliance. Clear, written consent and safeguarding records help demonstrate that the company has taken its responsibilities seriously and has not treated the arrangement informally.
Working Time and Education Compliance Records
Compliance with working time restrictions and school attendance requirements must be evidenced, not assumed. Employers are expected to keep records showing that a child’s working hours fall within legal limits and do not conflict with education.
This may include schedules of working hours, records of term-time and holiday working, and confirmation that work is not carried out during prohibited periods. Where a local authority child employment permit is required, a copy should be retained alongside internal records.
These records serve a dual purpose. They demonstrate compliance with child employment law and reinforce the credibility of the employment arrangement. In the absence of written records, a company may find it difficult to rebut allegations that a child has worked excessive or unlawful hours.
Health and Safety Risk Assessment for Young Workers
Employers have a legal duty to protect the health and safety of all employees, with additional obligations where the employee is a child or young person. A specific risk assessment should be carried out before employment begins, taking into account the child’s age, inexperience, and vulnerability.
This assessment should identify any risks associated with the work, even where the role appears low risk, such as office-based tasks. Consideration should be given to workstation setup, screen use, access to equipment, and supervision. The outcome of the assessment should be documented and kept under review.
A written risk assessment demonstrates that the company has complied with its health and safety duties and has considered the child’s welfare. It is a key document in defending any suggestion that the company has exposed a minor to inappropriate risk.
Data Protection and Privacy Documentation
When a limited company employs a child, it processes personal data relating to a minor, which attracts heightened protection under UK GDPR. This includes identification data, payroll information, and potentially performance or conduct records.
The company must provide a clear, age-appropriate employee privacy notice explaining how the child’s data will be used, stored, and protected. Generic staff privacy notices are often unsuitable, as they may not address the specific risks associated with children’s data or may rely on inappropriate lawful bases.
From a compliance perspective, data protection documentation is often overlooked in family employment arrangements. However, failure to address this properly can expose the company to regulatory risk. Clear, child-specific privacy documentation demonstrates that the company understands its obligations and treats the child as an employee with full legal rights.
Child Employment Compliance Checklist (UK Limited Companies)
To support directors in documenting child employment arrangements correctly, LexDex Solutions has prepared a practical compliance checklist setting out the key legal documents required when employing a child in a UK limited company.
The checklist is designed for use before and during employment and focuses on legal and regulatory compliance rather than accounting or tax planning. It covers employment law documentation, safeguarding records, working time and education compliance, health and safety assessments, data protection requirements, and internal governance evidence.
📄 Download the Child Employment Compliance Checklist
This checklist can be used as an internal compliance reference and as supporting evidence that the company has taken reasonable steps to meet its legal obligations when employing a minor.
Data Protection & Privacy Obligations When Employing a Minor
Children employed by a company are also data subjects under UK GDPR, which affords them specific protections. Any limited company processing a child’s personal data must comply with data protection law alongside employment law, child protection legislation, and health and safety duties. These obligations apply regardless of whether the child is related to a director or shareholder.
The primary legal framework is the UK General Data Protection Regulation (UK GDPR) and the Data Protection Act 2018, which establish enhanced protections for children’s personal data. These rules recognise that children may be less aware of risks, consequences, and safeguards in relation to the processing of their personal information. Controllers must therefore apply additional care when collecting, storing, or sharing a child’s data.
From a corporate perspective, processing a child employee’s personal data is a deliberate business decision. Companies must maintain clear documentation, including a child-specific Employee Privacy Notice and evidence of the lawful basis for processing. Directors must ensure that any data processing is transparent, necessary, and proportionate, and avoid generic staff privacy notices that fail to address the special considerations required for minors.
It is also important to distinguish between processing a child’s data as part of standard HR operations and the heightened obligations under data protection law. A limited company must ensure that all privacy practices relating to child employees are real, documented, and capable of standing up to regulatory scrutiny in the same way as employment records for adult staff. Family connection does not reduce the legal standard; in practice, it increases the need for formal safeguards and justification.
Payroll, Wages & Reasonableness: Legal Perspective
Remuneration of employees, including children or family members, is not purely an accounting matter; it engages legal duties and corporate governance obligations. Any payment made by a limited company must be reasonable, proportionate, and defensible in the eyes of regulators, shareholders, and, if necessary, the courts. These principles apply whether the recipient is a minor, a director, or a third-party employee.
The requirement for reasonableness is closely linked to directors’ duties under the Companies Act 2006. Directors must act in the best interests of the company, exercise care, skill, and diligence, and avoid arrangements that could be construed as artificial or excessive. Corporate governance standards reinforce this principle, ensuring that remuneration policies are transparent, documented, and capable of withstanding scrutiny.
It is also important to recognise that inflated or disproportionate salaries raise legal red flags beyond tax considerations. Payments that cannot be justified as commercially appropriate may be challenged as breaches of fiduciary duty or improper use of company funds. A defensible remuneration policy demonstrates that the company has applied objective criteria, considered market norms, and recorded the rationale for the payment decision.
In practice, linking payroll decisions to clear corporate governance processes protects both the company and its directors. This ensures that wage arrangements are defensible, maintain regulatory compliance, and uphold the integrity of the company’s financial and operational records.
Corporate Governance & Director Responsibilities
Directors of a limited company carry statutory duties under the Companies Act 2006, which require them to act in the best interests of the company, exercise reasonable care, skill, and diligence, and avoid conflicts of interest. These duties are not optional or flexible, and they apply regardless of whether the decisions concern day-to-day operations, employee remuneration, or the employment of family members.
Conflict of interest considerations are particularly important where directors’ personal or family connections intersect with company decisions. A failure to recognise or properly manage conflicts can expose directors to personal liability, reputational risk, and regulatory scrutiny. Directors must therefore ensure that any potential conflicts are disclosed, considered objectively, and recorded formally.
From a practical perspective, proper corporate governance relies on clear documentation. Board minutes, written resolutions, and formal approvals are essential to demonstrate that decisions were taken collectively, transparently, and in compliance with statutory duties. Such documentation provides evidence that directors acted responsibly and in good faith, protecting them personally in the event of internal disputes, shareholder challenges, or regulatory enquiries.
It is also important to distinguish between informal arrangements and formal corporate action. Even decisions that seem minor, such as approving employee pay or authorising company expenditures, must be properly documented. Doing so ensures that the company’s governance framework is robust, defensible, and capable of withstanding scrutiny, reinforcing both the company’s integrity and the directors’ personal protection.
Common Legal Mistakes to Avoid
When employing a child, companies frequently make errors that go beyond administrative oversight and carry real legal consequences. One of the most common mistakes is operating without a written employment contract. A lack of clear contractual terms leaves both the company and the child employee exposed, making it difficult to demonstrate the existence, scope, or legality of the employment relationship.
Equally problematic is failing to maintain evidence that work has been performed. Without proper records, directors cannot justify remuneration or demonstrate that the role was genuine, increasing the risk of regulatory scrutiny or challenges from tax authorities or other agencies. Similarly, ignoring the requirement for child employment permits or local authority approvals can render the employment unlawful from the outset, regardless of how well-intentioned the arrangement may be.
Reusing adult HR documents for a child employee is another frequent error. Standard employee privacy notices, contracts, or policies often fail to address the enhanced protections, consent requirements, and safeguards necessary for minors. Treating child employment purely as a tax exercise also demonstrates a misunderstanding of directors’ duties and corporate obligations; remuneration, documentation, and compliance must be defensible from both a legal and governance perspective.
In practice, avoiding these mistakes requires careful planning, proper documentation, and a clear understanding of the interplay between employment law, data protection, and corporate governance. Companies that adopt these safeguards can ensure that child employment is lawful, transparent, and fully compliant, protecting both the child and the directors personally.
How LexDex Solutions Supports Compliant Family Employment Structures
LexDex Solutions positions itself as a legal-first, compliance-focused partner for companies seeking to employ family members, including minors, in a fully defensible and lawful manner. We specialise in providing tailored documentation and guidance that ensures directors can meet their statutory duties, uphold corporate governance standards, and demonstrate that all employment arrangements are genuine, reasonable, and proportionate.
Our services include bespoke employment contracts, child-specific privacy documentation, and internal policies that reflect enhanced protections under UK GDPR and employment law. By focusing on preventative compliance rather than reactive fixes, we help companies avoid common legal pitfalls, from undocumented employment to improper remuneration or the misuse of generic HR documents.
With LexDex Solutions, directors and companies gain peace of mind knowing that their family employment structures are fully documented, legally defensible, and aligned with best practice.
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Employment First, Tax Efficiency Second
The key principle when employing children or family members is that lawful employment must come first, and tax efficiency second. This is not about exploiting loopholes or treating family arrangements as informal financial exercises; it is about ensuring that every employment relationship is genuine, defensible, and compliant with UK law.
Directors and companies are encouraged to get all documentation right from the outset. Proper employment contracts, child-specific privacy notices, and clear internal policies demonstrate that the company takes its obligations seriously and that the employment is real, proportionate, and transparent.
Child employment should be treated with the same seriousness, scrutiny, and governance as any other hire. By taking a proactive, compliance-focused approach, companies protect both the child and their directors personally, reduce regulatory risk, and create a strong foundation for lawful, well-managed family employment structures.