Do I need to run a payroll for every director?

[ittony]

My company consists of me and another director who has a small shareholding but does not take an active part in the day to day running of the company. During the 2007-08 tax year he received no salary, expenses or benefits in kind (only dividends). I've been running my own payroll for my own salary using the HMRC employer CD-ROM and am about to use the same to do my P14 and P35. Does the other director need to be included for P14 and P35 purposes (given that all directors are technically a special case of employee) and if so, have I made a mistake in not running a payroll for him over the past year even though it would have been nil every month?

Cheers, T.

[xoggoth]

I believe so in theory but utter waste of time I know. I send in forms full of 0s every year. If no actual salary, no consequences of not doing so as I think penalties are limited to amounts owed.

[VectraMan]

A low salary is the most tax efficient way of paying yourself, so you're wasting money by not having one. But as I understand it there's no obligation to run PAYE for directors/shareholders who are just drawing dividends. Tax on dividends happens via self assessment, not the company's responsibility to pay.

[xoggoth]

But isn't there something on the P14/P11D forms that say they have to be filled in by anyone who is director? Anyone got a paper form hanging about?

[VectraMan]

Hopefully one of the accountants can give a difinitive answer. My PlanB Co. has two of us as directors, but as we're both "employed" by other companies, I'd assumed we wouldn't have to worry about PAYE and just pay dividends (someday).

You don't see PLCs running PAYE for their shareholders, but I guess directors may well be a special case.

[ittony]

Hopefully one of the accountants can give a difinitive answer. My PlanB Co. has two of us as directors, but as we're both "employed" by other companies, I'd assumed we wouldn't have to worry about PAYE and just pay dividends (someday).

You don't see PLCs running PAYE for their shareholders, but I guess directors may well be a special case.

So you've not submitted P14s for your PlanB Co. directors in previous years then, or has it only just started up?

[ittony]

Any advances on yes-no-maybe for this one? To summarise, if one of the directors has a purely non-executive roll (though he may not be technically a non-executive director if such a legal distinction exists) and doesn't draw any sallery of benefits, does he need to be on the payroll, i.e. have a nil P11 working sheet and submit a P14?

Cheers, T.