Hi

I have a tricky situation regarding a client and I could do with some suggestions ....

He is the sole Director and employee of a Ltd Company, and has always taken just enough salary to

be eligible for pension, benefits, etc, but keeps below the threshold for Tax/NI liability (i.e. £7,696 p.a),

receiving anything else by way of dividends.

However, a situation has arisen whereby he has overpaid Tax/NI in previous years (don't understand how that

has happened!) and this has now been transferred to the current year, and we have been instructed by HMRC

to correct the overpayment by reducing the next payment (I'm sure by now you can see where the problem is

going to lie!).

So, the best solution (I was thinking) is to pay him sufficient salary in April to mop up the overpayment,  but I now

realise that paying a large lump sum in April could create a problem later in the year because

his NI is calculated annually and so none is paid until Month 10 (not to mention the Tax implications),  I was

wondering if I can process him as an ordinary employee for this year (i.e. not as a Director) and then revert

to the Director's method next year.

If not, how would anyone else sort this out (bearing in mind there is also the impact of the Employment

Allowance to consider).

Or should I just write to HMRC, explain the difficulties and ask them to refund the amount overpaid ?

(This is my least favoured option as it has already taken almost a year to get this far!)

Any help would be gratefully received !

Eunice