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Directors paid above the LEL - RTI and pension implications

I was at a seminar the other day run by HMRC where the speaker said "if the Director wants to get credit for his pension he needs to pay him(her)self above the LEL in all months during the year and not just in March.  Is this correct or can I vote myself a bonus in March (above the LEL for the year) so I do not have to run monthly FPS forms.  For the companies who have one director and are running a payroll scheme just for him this is potentially going to increase the work so we have to process 12 x 634 per month rather than one credit of £7605

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23rd Feb 2013 17:52

There have been many, many threads on running annual schemes under RTI. However, I still don't think we have reached a definitive answer!

I think I am right in saying that none of the main software providers allows an annual scheme.

Ignoring the obvious issue that an FPS should be made each time the director receives his salary - creative paperwork needed here! - Whilst you could pay the director only twice in the year (as an employee can be on hold for up to 6 mths) i believe you would still have to make an EPS submission each mth to confirm nothing is due.

Therefore, I don't think there is any other option but to do something each month - would love for someone to tell me I'm wrong on this though!

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None of the main software providers?

zeofiles wrote:
There have been many, many threads on running annual schemes under RTI. However, I still don't think we have reached a definitive answer! I think I am right in saying that none of the main software providers allows an annual scheme. Ignoring the obvious issue that an FPS should be made each time the director receives his salary - creative paperwork needed here! - Whilst you could pay the director only twice in the year (as an employee can be on hold for up to 6 mths) i believe you would still have to make an EPS submission each mth to confirm nothing is due. Therefore, I don't think there is any other option but to do something each month - would love for someone to tell me I'm wrong on this though!

It depends how you define "main software provider" as at least one with several thousand clients (including approaching 1,000 practices and bureaus) running its software offers annual pay intervals.

An employee marked with the "irregular payments" flag can be on hold indefinitely, is my understanding from HMRC.

Yes, at the moment you still need to file something for a company every month (a nil EPS at least) as HMRC's specification for multi-period EPS's is somewhat broken and should be avoided until it is mended.

 

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By Cube
23rd Feb 2013 20:22

'multi-period inactivity' & 'infrequently paid director problem'

IF this is the case, then a monthly PAYE payment just above LEL (say GBP 475, 2013/14) for the first 11 months might give maximum flexibility in month 12.

However, wouldn't HMRC need a change in legislation to make this enforceable. I was under the impression that RTI was just a change in reporting.

I think that this thread is the most recent to try to address this situation, however it was reported that the "inactivity" reporting option is somehow currently broken.

 

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Re the original question

Quote:
I was at a seminar the other day run by HMRC where the speaker said "if the Director wants to get credit for his pension he needs to pay him(her)self above the LEL in all months during the year and not just in March.

So far as I am aware this is complete balderdash. State pension credit is assessed on an annual basis, and either you earn enough to get it, or you don't. I haven't heard anything about this changing.

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23rd Feb 2013 23:39

Annual pay intervals

Superpay also allows an annual pay interval, and we think you can get by with two or three EPS's for the year. However I agree with Tom that the nil reporting situation is very poorly specified.

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24th Feb 2013 21:35

12 Pay

Sorry Tom, but until reading all the RTI threads on here i wasn't aware of 12pay, hence why i didnt class you as a 'main' provider.

However, I do now!! I will certainly look you up should we decide to change software.

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25th Feb 2013 17:22

Im with Tom

I must confess that I am with Tom here - I thought it was an annual period but could not prove it using the legislation - it is a bit complex to say the least.  However two pragmatic points apply (a) that software providers do not allow annual pay so it looks like I am doing payroll monthly for Smith Kennedy Limited and (b) it is very difficult to say that drawings by the director are not on account of fees paid in March even if there is a healthy credit balance. Given that the onus of proof is on the taxpayer and the risk is fines for incorrect FPS's (or late FPS the year after next) I suspect a low risk option of monthly salary is best.  

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