Annual Payment and RTI Paye

[drumtochty]

Contreras

I agree that if you say it is a year end payment in October by putting zero in Nov to March payments in the HMRC Basic PATE software software then you pay no national insurance.

I also agree that is what the CN44 guide says i.e. the director is charged on an annual basis.

The problem I foresee is that the simplistic model that will be used from April 2011 for the PAYE RTI system where you have to do a return a month I believe my be so inflexible that it may say this is month 7 and you cannot pay the director over 7/12 of the secondary threshold or it will tell you to pay an NI contribution and some people on the RTI pilot are advising this is happening.

There is some news that RTI it is now allowing annual payments so we will see in the next tax year if the HMRC basic PAYE software will allow this!

Just because it does not agree with the CN44 rules does not mean that the HMRC software will be corrected.

[Contreras]

That's what I'm getting at. If you pay per month in month 7 i.e. 6th October you can pay 7/ 12th of the annual secondary threshold. I reckon any more and you pay NI that you cannot reclaim like you can tax later in the year.

That's not how it works for directors earnings.

For directors pay, NICs are calculated on total earnings paid.

Or put another way, NI only becomes due when the accumulated salary in that tax year exceeds the threshold.

See here for HMRC guidance note.

[drumtochty]

Yep, that was what I thought I remembered lol

That's what I'm getting at. If you pay per month in month 7 i.e. 6th October you can pay 7/ 12th of the annual secondary threshold. I reckon any more and you pay NI that you cannot reclaim like you can tax later in the year.

I recon it's a non starter and there is no way of paying the full £7k of the secondary threshold by early October 2013 without paying NI.

[tractor]

...

Directors are taxed differently so you cant save NI by doing this.

Yep, that was what I thought I remembered lol

[Sockpuppet]

I can'r remember what it was exactly but isn't there an NI issue if you pay in one lump sum even thought it's below the annual threshold? Long time since I did PAYE but you might want to check it out?

Directors are taxed differently so you cant save NI by doing this.

[tractor]

...

Company year end mid October 2013.

I would like to pay both directors an annual payment of £7,696, the secondary threshold by 7 October 2013. For the 2013 2014 paye period.

So that is only 7 months into the tax year.

Before RTI was this allowed or did you need to do it in month 12 i.e. mid March.

Is there anyone on the RTI pilot and do they have any info on this

I can'r remember what it was exactly but isn't there an NI issue if you pay in one lump sum even thought it's below the annual threshold? Long time since I did PAYE but you might want to check it out?

[Jessica@WhiteFieldTax]

You can pay your directors what you like when you like. RTI just changes the way you report it to HMRC nothing else.

Sort of.

There's a a suggestion that if no earnings are reported for three months for a employee HMRC will assume that the employment has ended.

I'm sure that will sort itself out and/or a workaround will come up.

It's one of the "devil in the detail" issues though.

[Sockpuppet]

Company year end mid October 2013.

I would like to pay both directors an annual payment of £7,696, the secondary threshold by 7 October 2013. For the 2013 2014 paye period.

So that is only 7 months into the tax year.

Before RTI was this allowed or did you need to do it in month 12 i.e. mid March.

Is there anyone on the RTI pilot and do they have any info on this

You can pay your directors what you like when you like. RTI just changes the way you report it to HMRC nothing else.

[drumtochty]

Company year end mid October 2013.

I would like to pay both directors an annual payment of £7,696, the secondary threshold by 7 October 2013. For the 2013 2014 paye period.

So that is only 7 months into the tax year.

Before RTI was this allowed or did you need to do it in month 12 i.e. mid March.

Is there anyone on the RTI pilot and do they have any info on this