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bigduckontax, Accountant
Category: Tax
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My client has 2 jobs one as an employee paying PAYE tax and

Customer Question

My client has 2 jobs one as an employee paying PAYE tax and NICs and she is also a Director of a Ltd Company both employments began prior to the current tax year. She has not taken any salary or dividends as a Director since the start of her directorship in November 2012. My client had a baby in January 2013 and has been on maternity leave from her PAYE employment up until Oct 2013 when she left. The Directorship is now her only job and she now wishes to draw a salary. My question is as she was a Director prior to the start of the tax year 06/04/2013 can I use a start date of 06/04/2013 for the "Alternative Method" NICs calculation. The company has been filing in RTI since 06/04/2013 and therefore a period of nil activity is in appropriate as there are other employees.
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

As far as I am aware the answer to your question is yes. As she did not receive any remuneration from the company before the start of the 13/14 tax year [current year] your approach is quite correct. The rules for calculating NI deductions for directors are summarised as follows:

'

Calculating NICs for a director

The standard annual earnings period method

Each time you pay the director:

  1. add up the total earnings (including fees and bonuses) for the tax year so far
  2. calculate the NICs due on this amount
  3. deduct from this the total NICs the director has paid in the year so far
  4. you are left with the NICs now due for the current payment

The alternative method

This allows you to calculate a director's NICs based on the actual intervals of payment - usually weekly or monthly - and make payments on account during the tax year, in the same way as you would for any other employee. However, the earnings period remains an annual one, or pro-rata annual one. So when the final payment for the tax year of the director's earnings is made, or if the directorship starts or stops part-way through the tax year, you must reassess the NICs due as described later in this guide.

More information

More information on how to calculate NICs for directors is contained in HMRC's publication CA44, 'National Insurance for Company Directors'.'

You seem to be on the right track anyway so I hope my reply assists you.

Customer: replied 3 years ago.

Hi Keith


 


Thank you for your reply this is the exact information which I downloaded from HMRC earlier today what seemed to cloud the issue was the sentence "However, the earnings period remains an annual one, or pro-rata annual one." I was thinking that despite being a Director prior to the start of 2013/14 I would have to file in RTI as if employment commenced in October 2013 as this was the date of the 1st Director`s salary and therefore the NICs would be pro-rata at 6/12ths. However, you believe as I originally did, until I looked to HMRC for further guidance, that the whole of the tax year can be used as the earnings period.

Expert:  bigduckontax replied 3 years ago.
The RTI is filed by the employer not the employee or their agent. If you are acting as the company's agent in this matter then RTI only needs filing when a payment is actually made irrespective of of the date of employment.

It is an anti tax avoidance measure in an attempt to reduce the situation where revenue was lost under the old system of weekly or monthly payment with monthly reporting and payment when wages were paid and the organisation went into receivership before the payment due date. This could be even worse for HMRC where the 3 monthly payment concession was used.
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Category: Tax
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Experience: FCCA FCMA CGMA ACIS
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Expert:  TonyTax replied 3 years ago.

HMRC need to know whether any payment is due or not under RTI. If no payment is due an an Employer Payment Summary needs to be submitted by the 19th of the following month. Take a look at http://www.hmrc.gov.uk/payerti/reporting/late-reporting.htm for confirmation. That can be done by whoever runs the payroll, including an agent.

Expert:  bigduckontax replied 3 years ago.
In my 40 years of experience of PAYE I have been aware of a number of cases where no RTI has been reported when no paymenthas been made. HMRC has never commented at all on the matter.

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