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Director / PAYE Scheme

Good morning

I have a client that did not have a PAYE scheme set up until April 12.  He is now saying that he would like to go back to the previous year 11/12, and for a portion of monies taken to be categorised as payroll?!

I have told him that he did not have a payroll scheme and therefore did not pay himself through payroll.  He has read on the internet that he does not need to register if he pays himself under the lower earnings limit. 

Firstly, I am not happy to retrospectively go back and change records.  Secondly, he was advised at the time to set up a payroll scheme, but did not wish to do this. 

I do not see how he can go back and say £x amount was payroll when there will be no payroll year end reports to support this.  This surely is for someone that only earns beneath the lower earnings limit.  Not a company director who takes dividends from their limited company. 

I am  sorry if this seems like a silly question and appreciate any answers.

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27th Feb 2013 13:45

I don't see a problem

"He has read on the internet that he does not need to register if he pays himself under the lower earnings limit."

True - provided that it is his only job.  The 2011/12 NI LEL was £5,304.

"I have told him that he did not have a payroll scheme and therefore did not pay himself through payroll."

He didn't have a PAYE scheme, but that does not mean that he could not pay himself a salary.

"I do not see how he can go back and say £x amount was payroll when there will be no payroll year end reports to support this."

If there are no PAYE deductions payable, there is no requirement for a payroll and hence, for any payroll year end reports.

"I am not happy to retrospectively go back and change records"

Where have the "monies taken" been posted?  CR Bank DR Director's Loan Account?  If so, you are not changing any records.  You are just entering a journal DR Salary CR DLA.

The only thing that puzzles me is why he should want to process a salary of less than the LEL - it gains him nothing.

However, if you are not happy with this, you should consider ceasing to act for this client.

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By be1
27th Feb 2013 14:13

Thank you for your comment, it is much appreciated. 

Is this the case even if the director has had dividend income during that period?

 

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27th Feb 2013 16:40

Dividends

... paid by the company to its shareholding directors are completely separate from salaries paid to its directors - except that the more that is paid as salaries, the less that can be paid as dividends.

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