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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13979
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Afternoon I have just taken on a Client, who has set up

Customer Question

Afternoon

I have just taken on a Client, who has set up a private limited company, currently trading at a loss.

She has not taken any dividends or salary. She is the sole Director. Was made redundant from previous employment on 31.3.13

HMRC have sent her a bill for Class 2 NI for period 31.3.13 to 5.10.13.

I was planning to pay her a small salary from her business, just below the NI threshold, so she would accrue full NI benefit.

Why did she get a request to pay Class 2 NI?
How should I proceed?

Thanks
Submitted: 3 years ago.
Category: Tax
Expert:  Sam replied 3 years ago.
Hi

Thanks for your question

It sounds like she has been set up a sole trader (self employed) by mistake, rather than an employee (director) of the limited company - this will need remedying with HMRC and with the NI Office.

Thanks

Sam
Customer: replied 3 years ago.

Hi


 


Given that we are nearing the end of tax year should we leave her as self employed until April?


 


She wants to ensure that her NI contributions are fully paid up - will HMRC review and let her know if she needs to top up?


 


Thanks

Expert:  Sam replied 3 years ago.
Hi

Thanks for your response

No - as she is not self employed, she is in fact a director of the limited company - she can choose to pay Class 3 voluntary contributions (as no salary is being drawn on which NI is due) but adding self employment into the mix, when all the income has been earned through the limited company, is going to create a large mess for your client.

The Class 3 are more expensive than the Class2 but the right way to proceed, although I would stress that as only 30 years (full years) have to be paid to acquire a full state pension - then this may be false economy, and it would be prudent for your client to obtain a state pension forecast to establish
1) How many years she has contributed to date (including any years credited for HRP or Jobseeker/Income support claims) and
2) How many viable years remain between now and state pension age as to whether the 30 years will be achieved.

Let me know if you wish a link for the Class 3 voluntary contribution details.

Thanks

Sam

Customer: replied 3 years ago.

Thanks


I will get her to contact HMRC to get her status changed to Director.


 


I assume we will wait until she gets a new tax code before setting her up on a payroll?

Expert:  Sam replied 3 years ago.
Hi

Thanks for your response

As this is a new question on a new topic, it should either be listed as such as per Just policy. or a new amount offered or a bonus added once the initial question has been rated/accepted.

if you lost this as a new question, then do feel free to ask for me "Sam" in your first sentence with the new question posted.

Thanks

Sam