I have a new client who is a sole director/employee of his limited company. He has not long been trading and as yet has not taken any pay out of the company.
He has been set up with HMRC as an employee and I have got him set up on payroo to run the payroll.
If he doesn't take a salary regularly do I still need to run the payroll and submit the RTI to HMRC? I am going to tick the box to say irregular payments.
I have not done payroll for a few years. It was long before RTI came in and was manual!
You have two options, either keep it irregular as you say or pay him a salary each month and transfer it to DLA until he's in a position to withdraw it.
If paying irregular you will still need to file a RTI each month but it's known as EPS rather than FPS. I'm not familiar with Payroo but with my software (Moneysoft) I get a reminder to file.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
At my work we pay someone irregular weekly payments - they are below the threshold but putting through payroll anyway. Its the bosses son who's been going out with his dad one-two days a week during the holidays. When the holidays are over will I have to submit a weekly EPS then. All other employees are paid monthly. They are away next week so he won't be paid then either.
You need to first determine what he wants to do each year ie take up to his allowance in payroll plus divis. Or up to the LEL plus divis. Or if he only wants to take a salary irregularly. Or even, as one of mine does, a proper salary (although with the latter I've no idea why the accountant has suggested it that way at almost £3k pm when there are profits to be extracted?!??!!).
Then as John says you have the two options to report/pay via DLA if it's not physically taken.
-- Edited by Cheshire on Friday 14th of August 2015 01:49:31 PM
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I've no idea why the accountant has suggested it that way at almost £3k pm when there are profits to be extracted?!??!!
Good question Jo.
Can be all manner of reasons including the ability to reduce overall income below 100k (is the £3k per month the only assessable income? are there perhaps investment properties, investments, dividends as well as the PAYE amount) to avoid 60% (yep, you read that right!) tax by utilising pension contributions.
Dividends being investment income do not count as relevant earnings in the calculation of the allowable maximum annual gross pension contribution.
Other reasons may include the client being caught under IR35 legislation, The client wishing to make larger Pension contributions, basically, without knowing the facts its difficult to say why the accountant has gone for the approach that they have but if they are a qualified accountant as a general rule of thoumb the options will have been thought through to determin the optimum strategy for the given client.
And, always remember that dividends are not a free option. The company will have paid tax on the money that it uses to pay dividends but salary is an expense. (yes, I know that there's the class 1 elephant in the corner of the room there).
All that I'm trying to say is that there are too many variable to say that a dividend based sollution is always best for clients as indivual circumstances dictate that we treat every client as if they were our first.
That was fun and it's nearly burnt up my frustration at my PC deciding to just restart itself without asking whilst I was in the middle of a long email today. (grrrrr).
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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.
At my work we pay someone irregular weekly payments - they are below the threshold but putting through payroll anyway. Its the bosses son who's been going out with his dad one-two days a week during the holidays. When the holidays are over will I have to submit a weekly EPS then. All other employees are paid monthly. They are away next week so he won't be paid then either.
Hi Sammy
EPS are filed monthly, so on the 5th of each month you should get notification (1) to file an eps, which needs to be done by the 19th. If it's unlikely that the son will be doing any more work before April, it may be better to issue a P45
(1) I'm assuming here that other payroll software works in a similar way to Moneysoft.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
The non payment to the son will be reported when you send the monthly staff RTI. (You dont run a weekly payroll as well do you? If so you would need to run it weekly)
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I've no idea why the accountant has suggested it that way at almost £3k pm when there are profits to be extracted?!??!!
Good question Jo.
Can be all manner of reasons including the ability to reduce overall income below 100k (is the £3k per month the only assessable income? are there perhaps investment properties, investments, dividends as well as the PAYE amount) to avoid 60% (yep, you read that right!) tax by utilising pension contributions.
Dividends being investment income do not count as relevant earnings in the calculation of the allowable maximum annual gross pension contribution.
Other reasons may include the client being caught under IR35 legislation, The client wishing to make larger Pension contributions, basically, without knowing the facts its difficult to say why the accountant has gone for the approach that they have but if they are a qualified accountant as a general rule of thoumb the options will have been thought through to determin the optimum strategy for the given client.
And, always remember that dividends are not a free option. The company will have paid tax on the money that it uses to pay dividends but salary is an expense. (yes, I know that there's the class 1 elephant in the corner of the room there).
All that I'm trying to say is that there are too many variable to say that a dividend based sollution is always best for clients as indivual circumstances dictate that we treat every client as if they were our first.
That was fun and it's nearly burnt up my frustration at my PC deciding to just restart itself without asking whilst I was in the middle of a long email today. (grrrrr).
I couldnt find this posting the other day to respond! Sorry. My pondering was on the huge amounts of cash they take out of the business at the best of times, just wondering how that will sit with the large wage as well. Am just waiting for the Accountants adjustments to hit when I might have a better idea with what he has put where v what I did Not the friendliest of Accountants otherwise I mightve asked. But I am wondering if they think it will help to get a mortgage as they are in rented property and I seem to recall a passing comment recently about wanting to get out of rented!
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
And there's another good reason (besides pensions) in that many providers count salary as a multiplier but dividends only once if at all (he says telling his granny how to suck eggs!!! lol)... No, don't pick up on the word Granny, you know what I mean. With your bankers hat on this is your territory.... In developing the bank systems for you I really should have learnt more about what we were actually selling!
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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.
Oi you, I might be an old bird, but defo not a granny yet!! Yes of course I picked up on that!!!!!
I did loads of testing of new systems for the Bank, always tried to get our department onto pilots so had you be doing any for NWB you would've had me pecking your head then too!!!
-- Edited by Cheshire on Wednesday 19th of August 2015 10:13:50 PM
__________________
Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
Not the friendliest of Accountants otherwise I mightve asked. But I am wondering if they think it will help to get a mortgage as they are in rented property and I seem to recall a passing comment recently about wanting to get out of rented! 
