Credit salary to director's loan account

[jamesbrown]

I have been advised that under RTI rules, the salary must be physically paid on or shortly after an RTI submission is made, that being no later than the following 5th of the month.

Crediting it to the DLA is "paid" because it has been made available to the director in much the same way you might declare a dividend then credit it to the DLA and pay it later.

[Contreras]

Thanks everyone.

When I originally started out contracting I used to be religious about keeping everything as separate physical transactions. These days I typically credit salary, mileage and expenses (but not dividends) to the DLA as a spreadsheet exercise and then draw 'round sum' values ad-hoc keeping the balance positive.

Mentioned in passing that I would credit salary to the DLA due to cash-flow, and was met with the above along with a warning of HMRC penalties if they find out. I'm none the wiser about this "rule", or where the 5th of the month date comes from. I suspect there is an element of reality in there somewhere, but there's no worth in labouring it further.

Now I just have to get this image of a headless chicken running around dressed up as Judge Dredd out of my head.

[Paralytic]

Thanks everyone.

When I originally started out contracting I used to be religious about keeping everything as separate physical transactions. These days I typically credit salary, mileage and expenses (but not dividends) to the DLA as a spreadsheet exercise and then draw 'round sum' values ad-hoc keeping the balance positive.

Mentioned in passing that I would credit salary to the DLA due to cash-flow, and was met with the above along with a warning of HMRC penalties if they find out. I'm none the wiser about this "rule", or where the 5th of the month date comes from. I suspect there is an element of reality in there somewhere, but there's no worth in labouring it further.

Now I just have to get this image of a headless chicken running around dressed up as Judge Dredd out of my head.

Mention to whom, and what was their response where you asked where this "rule" came comes from?

[northernladuk]

Why are you pissing around with DLA when you don't fully understand it? Just do everything away from it and keep it clean.

[Contreras]

Mention to whom, and what was their response where you asked where this "rule" came comes from?

It was an email exchange with my accountant, about another matter. They said it's an RTI rule.

Why are you pissing around with DLA when you don't fully understand it? Just do everything away from it and keep it clean.

This just makes me sad.

[NotAllThere]

It is not unusual to post money belonging to an employee to an account in the COA under their name, then make payments from there.

It was an email exchange with my accountant, about another matter. They said it's an RTI rule.

The trick then will simply be to do the RTI just before you make the payment in actuality?

[Iliketax]

The reason is for cash flow. Salary is a lump sum at the level where employer NICs to pay but no personal tax.

I have been advised that under RTI rules, the salary must be physically paid on or shortly after an RTI submission is made, that being no later than the following 5th of the month.

Even if this is incorrect advice it would be useful to know what if any basis there could be for it (NL: yes, I have asked!) - to try to understand the source of confusion.

A payment of cash is not required. A "payment" is defined for PAYE purposes here: Income Tax (Earnings and Pensions) Act 2003 Crediting a DLA is part (a) of Rule 3. A tax month ends on the 5th of a month. You can find out more about timing by googling: RTI full payment submission.

[Craig@Clarity]

Can salary be credited to the DLA or must it be paid physically?

Can be credited. Doesn't have to be physically paid.

Is there any time limit or deadline to the payment, after the RTI submission?

Nope.

Is a simple spreadsheet sufficient, showing the DLA credits/debits?

Yes. Or a good online accounting package like Freeagent.

[northernladuk]

This just makes me sad.

I'd normally come to you first for questions like this