I have a friend who has just become a Director of his own limited company. I am a bit confused regarding the proceedure for PAYE, I know he is entitled to pay himself £624 a month but can I just post that as an expense or do I need to register him for PAYE and then run a payroll each month?
If someone could tell me the best way forward with this as I have had conflicting advice and am now totally confused as to which is the best way to do this.
You need to run a payroll for the company even if the company has zero quarterly returns.
Not yet sure of the effect of RTI on this but it certainly won't make it better.
Currently you will need the PAYE reference for year end reporting even though the amount paid is below the threshold for any payments.
HTH,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi Georgie, nothing set in stone yet. Tellingly, I have not heard anything yet requiring companies who don't need a PAYE scheme suddenly having to all register by next April.
For your client, I'd like to think that there will be some delay before RTI penalties start. There are noises from the software and accountancy sectors about small firms not nearly being ready to comply with this onerous obligation.
I am informed that arguments were raised in 1973 against universal VAT Registration. This resulted in a £5000 turnover threshold which is now £77K. Still highly unusual across Europe, so I've got my fingers crossed that there'll be some threshold, at least for a couple of years.
Thank you. What should I advise this friend to do? Should he register for PAYE or not? Could he just take a dividend for now? Sorry lots of questions ...I don't know what to tell him to do for the best.
I hate to see someone feeling like that. Well I've avoided the dividend / salary scenario, in fact, companies full stop, so not qualified to advise. No one is stupid and if anyone is, I should have studied this subject thoroughly over ten years ago before companies became de rigueur.
There's using up the NI threshold which Tom and Shaun have touched on and the minimum wage to consider. There's no 'entitlement' to take £624, as such, because your friend will be taxed on the whole of his income from all sources. He will only be able to take dividends as a proportion of profits etc so you can see why you're getting conflicting advice.
Really, although you'll find generic answers on here and elsewhere, there's no substitute for tax advice from a professional who has immersed himself in all the circumstances. Someone else may be more helpful, but never, ever be afraid of saying, I don't know as the alternative is worse.
Just to add there that there is no minimum wage if you own the company.
Also, if you were not registered for PAYE what would you put on the P14 / P60 at the end of the year under employers PAYE reference?
As I say, to my mind one has to be registered as an employer even if the salary level means that no PAYE is actually paid.
We are not saying here that no salary is paid, just that the slary is too low to make deductions. The salary that has been paid must surely still be reported.
kind regards,
Shaun.
p.s. agree with Tim. No stupid questions, only stupid answers. (made a few of them but always admit to / correct them so feel no guilt).
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi Shaun, thanks for following that up on a busy forum day with cloud very much on the agenda.
There we are..... I'm ignorant that Min Wage is side-tracked if where a single shareholder owns the company. Whats the Black Country speak for "I own my own company?"
Where no deductions made (usually tax/NI) a P60 isn't necessary. It should be, but don't think it is required by law.
You've got me wondering now with RTI. Don't want to be giving a bum steer. I think historically that there's no need to be registered where there are no deductions and below the LEL. That doesn't sit at all with 'Reporting each wage as and when it is paid" for Universal Credit.
Whats the Black Country speak for "I own my own company?"
Well i Midlands terms normally that would be "Will, Oi'm considerably richer than yow".
(Thankyou Harry Enfield)
Translation "well, I'm considerably better off than you are".
Sounds as though I over file as I do the blank PAYE returns, end of year returns, regardless.... If directors are not on PAYE how can they consider themselves employee's. If they have no employee income then they lose benefit entitlements.
Oh well, at least it makes it simple when they do pay themselves enough to live on.
My main concern with RTI is still that they believe that salary only comes at regular intervals, not two payments one month, nothing for another three, etc. Basically, directors get salary when clients pay them (and by then it just pays off the overdraft / credit cards that they have been living off.
kind regards,
Shaun.
p.s. yes, does seem to have been a bit of a cloud day doesn't it... Enjoyed the DLA question though even though I missed one key component of the question so got the 15k de minimus bit wrong for the 25% withholding charge.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Shamus wrote:Well i Midlands terms normally that would be "Will, Oi'm considerably richer than yow". (Thankyou Harry Enfield)
LOL Can't get awer from it. Yow also is Nottinam/Sheffield. I knew my luck was in at college when told "maa miat fanses yow"
Know what you're saying about "how can directors consider themselves employees" because HMRC become a witness to the contract; thus enabling benefit claims.
I get wee'd off that pensioners on self assessment don't get P60's or any payslips because there are no deductions. Doesn't help when they have ten income sources.
Also, never understood why a PAYE scheme was automatically set up upon forming a company - i did a lot of trading name protection at one time. Got on my wick because then you're on the penalty conveyor belt. Employing and forming a company are two separate things.
"My main concern with RTI is still that they believe that salary only comes at regular intervals, not two payments one month, nothing for another three, etc. Basically, directors get salary when clients pay them (and by then it just pays off the overdraft / credit cards that they have been living off"
Right, I see now, it's not just delaying salary for cumulative NIC purposes or anything thats beyond me. It is actual real life cash-flow. Good argument. I'll include that next time i write to the Works and Pensions Committee.
As far as I am aware if a person is being paid under the NI limit and you know they have no other employment they do not need to be on a payroll nor does the "company" need to set up a PAYE Scheme - however for a Ltd company I can't see how this would apply as has been said because how could the company have no employee. I only have one newly set up Ltd company which fits this scenario (was sole trader and has recently become Ltd) and I've set up a PAYE scheme and do a nil report each month/quarter.
As far as I am aware if a person is being paid under the NI limit and you know they have no other employment they do not need to be on a payroll nor does the "company" need to set up a PAYE Scheme - however for a Ltd company I can't see how this would apply as has been said because how could the company have no employee. I only have one newly set up Ltd company which fits this scenario (was sole trader and has recently become Ltd) and I've set up a PAYE scheme and do a nil report each month/quarter.
A director does not have to be an employee at all.
Just got this vision of Tom popping around with a shotgun now...
No Tom, Georgie didn't mean it that way!!!
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
A director doesn't have to be a shareholder either. The shareholders can appoint any director they wish, but that doesn't necessarily make the person they appoint an employee. Perhaps that person doesn't get paid for their input.
Directorship is an Office, not an employment.
In small one-man-band ltd companies the distinction between shareholders, employees, and directors is blurred because it is normal for all 3 to be embodied in one single person. A shareholder who owns 100% of the shares, appoints herself director, and does all the work. Some smaller practices, that is the only kind of business they ever see and work for.
As companies get larger you see all kind of variations. I've been in companies where non-executive directors owned shares and turned up to board meetings but weren't employees at all. I've even seen directors who owned no shares and weren't employees either (an experienced businessman who was a family friend and acted as mentor). I've seen non-execs who submit fee invoices to the company for their presence at board meetings.
