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Directors hours RTI

Morning all.

As part of the launch to RTI next year HMRC require you to disclose information on employees/directors with regards to their working hours.

From what i can understand there will be four brackets to choose from.

How does this work with regards to directors who are on low salary high dividends, obviously will need to keep the hourly pay above the NMW, but what are peoples views on this and what will you be disclosing to HMRC?

Thanks in advance.

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No problem with NMW

Most of the directors for my smaller clients work no more than 1 hour per week in their capacity as employees, earning around £10k. The rest of their time is spent in their capacity as officers.

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Office holders

Directors are by default "office holders", which is exempt from NMW.

It is only when they have an employment contract that they become employees as well, which is when NMW starts to apply to them.

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are directors as office holders

exempt fron the automatic right to a contract of employment

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An office holder is not required to be an employee

carnmores wrote:
Are directors as office holders exempt from the automatic right to a contract of employment

Yes, in as far as a director who is only an office holder is not required and cannot be compelled to be an employee.

Only if he / she becomes an employee does the right to an employment contract and therefore NMW come in, just as it would for any employee, office holder or not.

None of this prevents directors emoluments being taxed under PAYE although it is perfectly reasonable to have a company whose only personnel are office holders paid through dividends and therefore requiring neither NMW or PAYE / RTI compliance as none are relevant.

This approach is sensible where office holders have other income from PAYE (pensions and employment with other 3rd parties) utilizing their tax free allowance or are non-resident.

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@carnmores

I believe directorship itself doesn't exempt them from the right to receive a contract of employment, if the relationship is clearly one of employment.  If a director is hired and told he/she has a salary of £45k and 4 weeks paid holiday, and are expected to work 40 hours per week, then they are probably employees, with all the rights that employees have.

I, on the other hand, sit on a board of directors of my residents company.  It involves a fair amount of time throughout the year.  From the outset I was told it was voluntary and I've never received an employment contract or any payment.  So in this case, I am just an office holder rather than an employee.  NMW would not apply to me ... although I wish it could!

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@0103953 @frustrated

thats what i thought , i was thinking about the first reply here where 1 hours work was done - presumably this situation is to be avoided - what about if there are no employees can a company still hold there are no emplyees , seems unlikely if any sort of work is being carried out ??

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LETTER OF THE LAW

Morning all.

As part of the launch to RTI next year HMRC require you to disclose information on employees/directors with regards to their working hours.

From what i can understand there will be four brackets to choose from.

How does this work with regards to directors who are on low salary high dividends, obviously will need to keep the hourly pay above the NMW, but what are peoples views on this and what will you be disclosing to HMRC?

Thanks in advance. 

 

there is an option for not disclosing hours should you choose........to do so.

UNLESS YOU ARE ON THE PILOT YOU WONT KNOW YET,

BUT THE CRUX IS THAT IF A DIRECTOR HAS A NOMINAL SALARY FOR NI PURPOSES THEN THE PAYMENT OF IT CAN BE MADE AT ONE TIME POINT(WITHIN 9 MONTHS OF THE YEAR END). rti REQUIRES REAL TIME REPORTING WHEN YOU MAKE A SALARY PAYMENT-so if cauals are paid in one mon th and not others you only have to file the RTI report for the casual the month its paid in.

 

rti like the universal tax credit is going to send everyone mental.

so change regular below tax threhold payments to annual payments so you dont have such an rti burden-me thinks rti will take alot more people "off payroll" and into freelancing.

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I don't see the floodgates opening...

david5541 wrote:
So change regular below tax threshold payments to annual payments so you don't have such an RTI burden-me thinks RTI will take a lot more people "off payroll" and into freelancing.

The problem with RTI is that it is a business burden which pays no heed to the ancient bureaucratic guideline of "de minimis non curat lex" ("The law does not concern itself with trifles").

This means that a great deal of time and effort is being spent by clients and their accountants to mitigate the burden of RTI.

Where payrolls are already being run, this should (hopefully) be negligible as software providers are integrating RTI options, but for those whose only payments are annual and below LEL, this is clearly a pointless bureaucratic exercise.

I have already advised two new companies against making anything other than dividend payments to their owner/operator director/shareholders to defer PAYE & RTI compliance issues until both sanity and clarity return to HMRC (we might be waiting a while).

This is satisfactory for them as they have other income which can be used to soak up their tax-free allowance.

"Quem deus vult perdere, dementat prius" ("Whom the gods would destroy, they first make mad")

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overall

My overall plan for mitigation of this farce:

1.  All clients who operate PAYE for historic reasons i.e not compelled to have already shut down their schemes.  This is mainly clients who pay up to 7 people, all below £107 per week.

2.  All clients who currently pay weekly are moving to monthly pay.

3.  That leaves directors.  Most should be fine with a move to once per year, currently I issue a monthly payslip so they know the score.  One possible problem is with the ones who are close to the wire, where in order to reduce PAYE hassle you end up with a director's loan problem.  I'll probably do these guys more regularly.

Every year one or two of my director clients change horses mid-year i.e they'll call me and tell me about some additional PAYE work they've done.  No problem for 2012-13, just slash the director's salary on their limited company.

But in 2013-14 unless the system allows for negative pay you'll end up overpaying PAYE.  So the default will be shove it all through in month 12.

Or have I missed anything, as the goalposts on this RTI drivel seem to move every few weeks?

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and what about P11ds

disclosable benefits where no salary is drawn , is there a work around

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@carnmores

When I went to the HMRC "using PAYE in real time (RTI)" presentation last week they guy from HMRC said that you could tell HMRC that the payroll is annual if you wish (I guess something you can do online).

So for no salary, but reportable benefits, I would flag the "salary" as an annual one and report a nil salary once a year.

Not looking forward to all this RTI nonsense!

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Annual pay intervals are a payroll software feature

0103953 wrote:

When I went to the HMRC "using PAYE in real time (RTI)" presentation last week they guy from HMRC said that you could tell HMRC that the payroll is annual if you wish (I guess something you can do online).

So for no salary, but reportable benefits, I would flag the "salary" as an annual one and report a nil salary once a year.

Not looking forward to all this RTI nonsense!

Annual salary processing is a payroll software feature. Not every payroll package may support it. (to forestall inevitable misunderstandings annual salary processing is NOT the same thing as setting the director's NI calculation method). I don't believe that you'll be able to do anything directly online to handle this because HMRC isn't offering any direct RTI processing online; the information must come from your payroll software.

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Directors and RTI

Don't forget that under RTI you will be making full submissions whenever payments are made. So for those posters above who will be processing an annual salary below the LEL in month 12 that means the recipient cannot receive any salary in months one to eleven. Is the director  happy with that?

There is a flag to set on each RTI submission for any employee / director that is not receiving a payment this time round but has not left. If this flag is not set then after three months HMRC will deem them as left. Remember there are no P45 submissions to HMRC under RTI so this what HMRC will assume. As I see it, if you are only dealing with a owner managed company with no other employees, you still need to make a full submission to show nil payment but they haven't left.

When making a submission you will be asked for employees contracted hours not the hours they have worked. There are four bands. For directors who are office holders this is likely to be the nil band.

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Penalty Regime published today

And I think it looks like good news.

It seems that up to April 2014 at least there will be no penalties for late/innaccurate RTI submissions to HMRC, other than the "Final Payment" of each year, for which the penalty regime will be the same as the one currently operating for P35/P14.

That may change in the future, but at least we're not *starting* with a CIS-like penalty regime.

 

This is very important, so I'll start a new thread...

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