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More RTI qoes

Hi all

The issue of RTI with directors taking 12 x 624 seems to be well trodden ground on Any Answers at the moment.  However my firm takes a different approach.  I tend to tell my clients to pay themselves one payment of £7,488 p.a. rather than taking a monthly salary.  Just means that I have to run the payroll once a year rather than 12 times a year (seems a no-brainer).

My payroll software currently does not allow annual pay periods.  To fudge it we have up to now run the payroll in month 12 in order to get the correct deductions (i.e. nil).  RTI will thwart this fudging, so if I run the annual payment of £7,488 in September, I will need to report it under RTI but the software will not calculate the correct deductions.

The question is what payroll products are out there that permit annual pay periods?

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09th Nov 2012 17:25

it's currently possible

My software - Able Internet - currently permits this anyway, you simply check the box "Director" instead of employee.

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12Pay does it

Normally I wouldn't answer a thread to promote my company's own product, but since the question is one that admits a factual yes/no the answer in the case of 12Pay is "yes". (You do need to purchase a Bureau licence to get that functionality)

 

Mr Mischief, are you sure? Does ticking that director box in Able give a full year's PAYE allowance regardless of payment date? In most software products the director calculation refers to NI only. You need a pay interval of "Annual" to get a full year's PAYE allowance unless you're making the payment in March in most software.

Ticking the director box to "trick" the software into giving an annual allowance could also be misleading and wrong in the cases where the employee in question isn't in fact a director. A classic example of this would be director's wife who is receiving a threshold salary. Directorship (or not) is part of what is reported to HMRC for RTI purposes so it wouldn't do to indicate that an employee was a director to get a desired calculation result unless that employee was, in fact, a director.

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@Tom you can only do this with directors

If the "directors wife" was not a director than a lump sum payment would be subject to NI.

The way most software co's do this is a PIA in that it will assume payments ongoing, even if you zero the payments for income tax ongoing, hence the work around of putting them into March. 

Ideally your software would allow a bullet payment in one period and the ability to deduct no income tax or NI if it is known it will be zero for the rest of the year. 

 

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Wrong, you don't need to be a director

ireallyshouldknowthisbut wrote:

@Tom you can only do this with directors

If the "directors wife" was not a director than a lump sum payment would be subject to NI.

 

The payment is indeed subject to NI, but if the pay interval is annual then the calculation is against annual bandwidths, just like with a director. HMRC document CWG2 is totally clear about this (Chapter 1, Page 8). So a single payment under the Annual Earnings Threshold in a payroll whose pay interval is annual attracts no NI deduction.

So indeed the way most software does this may be a PITA, but that doesn't mean that it is not possible to do it correctly, like other software. :)

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Well you learn something ever day.  

That's quite a narrow set of circumstances in which it would work however, ie if you took a part timer on paid monthly, it wouldn't fly. 

I would still prefer making them a director!.

 

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PAYE, too.

ireallyshouldknowthisbut wrote:

Well you learn something ever day.  

That's quite a narrow set of circumstances in which it would work however, ie if you took a part timer on paid monthly, it wouldn't fly. 

I would still prefer making them a director!.

 

It works very well in the specific case I mentioned of family members of directors who are paid annually for their "input". Legally you might well prefer not to make these people directors. I know of at least one practice with hundreds of threshold payrolls set up like this.

But more importantly for most practices the annual pay interval solves the PAYE problem associated with making a single annual payment that isn't in March.

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By lmr
12th Nov 2012 11:49

Annual PAYE

Most softwares would still let you get around the issue of PAYE being deducted if you run an annual payroll in a month earlier than March - simply advance their pay through the holiday method. I know its possible on IRIS products and Sage.

 

You could even run in April, and advance the pay by 11 months to get the correct annual figures if need be.

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Non-directors NI...

lmr wrote:

Most softwares would still let you get around the issue of PAYE being deducted if you run an annual payroll in a month earlier than March - simply advance their pay through the holiday method. I know its possible on IRIS products and Sage.

 

You could even run in April, and advance the pay by 11 months to get the correct annual figures if need be.

The NI would be wrong for non-directors.

 

 

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By lmr
14th Nov 2012 13:17

IPP

TomMcClelland wrote:

lmr wrote:

Most softwares would still let you get around the issue of PAYE being deducted if you run an annual payroll in a month earlier than March - simply advance their pay through the holiday method. I know its possible on IRIS products and Sage.

 

You could even run in April, and advance the pay by 11 months to get the correct annual figures if need be.

The NI would be wrong for non-directors.

 

 

 

Not on IRIS Payroll Professional, providing the Gross amount was the same every month (and above the PT) It would give 12 months worth of monthly NI allowances.

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Different basis for PAYE and NI?

lmr wrote:

TomMcClelland wrote:

lmr wrote:

Most softwares would still let you get around the issue of PAYE being deducted if you run an annual payroll in a month earlier than March - simply advance their pay through the holiday method. I know its possible on IRIS products and Sage.

 

You could even run in April, and advance the pay by 11 months to get the correct annual figures if need be.

The NI would be wrong for non-directors.

 

 

 

Not on IRIS Payroll Professional, providing the Gross amount was the same every month (and above the PT) It would give 12 months worth of monthly NI allowances.

I wasn't responding to your final sentence, which sounds correct. The first sentence sounds unlikely though.

How would it achieve that, if you told it to do 6 months advance allowances for a single payment in September? (more than 6 months advance would get the PAYE wrong). Does it allow you to use a different calculation basis for PAYE and NI?

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14th Nov 2012 11:36

Tax Code

What if they had been issued with a week 1/month 1 tax code, do HMRC issue "Year 1" tax codes?

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When asking that question, consider...

craig preece wrote:

What if they had been issued with a week 1/month 1 tax code, do HMRC issue "Year 1" tax codes?

 

... the completely normal possiblity of 2 weekly and 4 weekly payrolls.

HMRC says that for a w1/m1 tax code the allowance is scaled by the period frequency, so for a payroll operated on a 12 monthly basis you get a year's allowance with a w1/m1 code. The answers are all in CWG2.

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By stratty
14th Nov 2012 11:38

Payroll Software

Star Payroll supports this.  

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By PETERP
14th Nov 2012 13:49

Annual Pay Periods

The whole of range of Qtac Payroll Software has annual pay periods and is RTI approved. We now have a new Payroll Lite product which is free for this tax year for up to 5 employees and is RTI enabled.

Peter Prater MD Qtac Solutuions Ltd

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14th Nov 2012 14:30

Here at Clear Books our Open Payroll app will allow you to set up an annual pay run. However, it would be interesting to see how this would work in practice. Is it OK to credit the net salary to a director's loan account, then draw it down over the tax year in regular monthly payments? Specifically, how would this work with the RTI BACS hash field?

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14th Nov 2012 14:53

'On or Before'

Just to add my own aside to this, if you want to pay the director £624 each month, do it! And do all the reports in one go in April, before making any payment. In that way, you satisfy the 'On or Before' requirement under RTI.

 

Of course, if you change your mind later...............

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14th Nov 2012 15:06

On or before

As I understand it (oxymoron?) you should submit RTI info before payment.  One leading tax commentator has said to process months 1 - 11 and submit those in April.  Then do month 12 in March, when you can check 'all is well' and have the chance to rectify anything that has changed in the preceding 11 months.

It's not what the OP has asked, but more of what the rest of us might or will do in practice.

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14th Nov 2012 18:04

Works with Moneysoft Payroll Manager

I use Payroll Manager by Moneysoft and have no problem with annual pay periods.  I just ran the RTI data validation check on a payroll with a director paid annually and it didn't report any problems., so all looks well. 

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