I have had a search on here and other places and am unable to find a clear answer to my question.
We have a number of small Ltd companies, owner managed, with 1 or two directors. The directors pay themselves a small wage each month (£624 I think, enough to earn NI credits but not enough so that they have to pay any tax or NI - the LEL?). At the year end a nil P35 is completed, no other forms are completed.
I am aware that under RTI, companies where all employees earn less than the LEL do no have to submit returns each time payments are made. My question is, does this apply to companies where the only employees are the directors who are earning less than the LEL? Or are there seperate rules for them?
And what happens at year end, instead of a nil P35?
I'm pretty sure that they won't have to do anything until the year end but would like that confirmed.
I did go on an RTI course just last week, then went back to work and was asked this question by my employer. The question had not come up in the course, and not being that involved in payroll I had not thought to ask it. So I'm really hoping that some-one will be able to answer, or even better point me in the direction of some HMRC advice/guidance to help me and score me some brownie points at work
If anyone has a PAYE scheme where an employee is paid at or over the LEL then all employees within that PAYE scheme must be reported however low their earnings as the P38A has been discontinued. As I understand it, it will not acceptable for employed directors (as opposed to sole traders) to ask their accountant at the end of the year to prepare a payroll that shows that the director has been paid each month, an FPS must be sent each time the director is paid.
I am aware that under RTI, companies where all employees earn less than the LEL do no have to submit returns each time payments are made.
Hi Maria,
Can you tell me where I can reference that please.
My impression was that lower paid workers and directors are the ones that need tax credits but tax credits will be linked into RTI.
If there is no recorded payment then surely that means that there will also be no tax credits?
many thanks in advance,
kind regards,
Shaun.
__________________
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.
It's what I picked up from my course and from reading the answer to this question..
"Q: Is an employer required to submit RTI returns if they do not currently have a PAYE scheme to submit PAYE returns and do not have any employees earning above the LEL?"
..on this link...
http://www.hmrc.gov.uk/rti/employerfaqs.htm
That said, what I also remember from my course is that as soon as you have one employee that you have to report on (earning > LEL) you also have to report on all those who are earning < LEL i.e, you have to fill in nil returns for them...this is my understanding anyway.
I'm still confused because although the small companies we act for have no employees earning more than the LEL, they do have a payroll scheme - so do they or don't they have to complete submissions under RTI when 'wages' payments are made to the directors?
Just to clarify, the £624/month figure mentioned is well above the LEL, even though no NI is payable, so under the old scheme a P35/P14 would be required, and under RTI an FPS will be required every time a payment is made. Do you have other employers paying directors below the LEL?
Q: Is an employer required to submit RTI returns if they do not currently have a PAYE scheme to submit PAYE returns and do not have any employees earning above the LEL? A: The operation of PAYE remains the same under RTI. So if an employer is not required by law to complete a 'deductions working sheet' for any employee, the employer will not be required to operate PAYE, so not subject to RTI, or have a PAYE scheme.
Where an employee earns less than the LEL and their income is not required to be reported under PAYE, the individual will be expected to inform DWP of their earnings. As part of Universal Credit, DWP will have alternative processes to collect information about income that is not reported through RTI.
If an employer is operating PAYE then using RTI they will have to tell us about payments of earnings to all employees, even where an employee earns less than the LEL. This is a change from now, where employers do not have to maintain a P11 if someone earns, for example, £20 a month.
So you could have 10 employees, who all earn below the LEL, and not have to report anything, but if you employ 1 extra person earning above the LEL, then you'll have to report everyone.
Cheers Tom for clarify my very basic mistake about the LEL and £624. £624 is the secondary threshold. And no, no one being paid under the LEL, they get paid £624 in order to get NI credits but do not have to pay tax or NI.
GBM, I agree with your summary.
My own summary, we'll now have to submit monthly RTI returns for the directors where before we did nothing....next question......what should we charge them?????????????? (That wasn't a real question, but if we goning to have to do it, we're going to have to make something out of it!!)
How about the price that we used to charge for the P35 / 12... Or, just keep the P35 charge and tell them why.
__________________
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:........My impression was that lower paid workers and directors are the ones that need tax credits but tax credits will be linked into RTI.
GMB wrote:
...........As part of Universal Credit, DWP will have alternative processes to collect information about income that is not reported through RTI.
From:-
http://www.hmrc.gov.uk/rti/employerfaqs.htm
To me, this demonstrates that RTI is not really about up to date information for Universal Tax Credits.
How about the price that we used to charge for the P35 / 12... Or, just keep the P35 charge and tell them why.
I was thinking of increasing my per employee charges during the year on the basis of extra work involved but then counter it by either reducing or scrapping the per employee payroll year end charge
yep, sounds good. My response was peculiar to the one man band companies where basically the current returns are 3 nil returns followed by a balancing return and a P35.
Now we get 12 returns and no P35. However, the 12 returns rather than being blanks will be completed with the actual payments made so more work there / less work at the end of year (I have previously pretty much thought of the final PAYE return and setting up the P35 for filing as one task and charged on that basis (and nothing for the empty returns before the director hits chargability)).
Sure that there are many other viable charging strategies for this work,
kind regards,
Shaun.
__________________
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.
Just following on from the original post, would it be allowable for a Director to pay himself Nil for 11 months of the year and then £7488 (using this year's figures) in Month 12 ? Will he need to report on Months 1-11 at zero payable ?
I currently do some payrolls where the only employee is the Director and I have up until now just reported the whole year on the P35 after Month 12. I'm just trying to work out how this will change under RTI - obviously if I've got to report every month then I shall report £624 (or equivalent figure for 2013/2014), but with such an increase in workload I'm going to have to more than the £50 I have been doing before.
I should just add that the Directors don't actually pay themselves anything, they take money
out of the company against the Director's loan account and then the salary figure payable is
netted against the DLA.
-- Edited by Bucks Bodger on Friday 11th of January 2013 05:30:17 PM
You can pay a single figure in one month, but you'll need to file a nil EPS return the other 11 months. This is similar to the requirement to notify HMRC of the nil payment for the month/quarter in the PAYE scheme, and replaces that requirement.
