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RTI for directors

Has anyone heard whether HMRC have decided how to deal with small companies whose only employees are directors with no PAYE/NI to pay but are receiving a salary each month? Are they really going to have to submit their payroll every month under RTI? I was on a course before the summer and was advised that this question had been put to HMRC but I haven't seen anything further about it.

This could have a big impact on many of our clients who engage us to complete their end of year Employers Annual Return but as they receive the minimum directors salary require little payroll assistance during the year. Don't think they will be too impressed with having their fees increased for us to press a button each month end! But it is all additional time.

Any useful advice welcome.

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I suspect they will

I have a horrible feeling they are going to have to, but I really hope not or my life will be dominated by payroll from April.

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Agree

In theory, under RTI a return should be made every time a (wage/salary) payment is made. I highlight wage/salary as most directors also draw dividends and directors loan repayments and these obviously don’t have to be reported.

However, by using RTI the year end procedure is no longer required. Obviously, I am unsure as to how you charge but taking this into account, I can’t imagine there would be a significant increase in fees

Alternatively, there is a possibility of running an annual payroll although there are a number of considerations to this, not least the amount of time the payroll can be marked as ‘on hold’ for.

 

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Not necessarily

If all the employees in a company (whether directors or not) are paid below the LEL there is no requirement to have a PAYE scheme and no requirement to submit RTI.

 

However, if a single employee in the company is paid above the LEL then a PAYE scheme is required and ALL employees, whether paid above or below the LEL, are required to have their payments submitted to HMRC using a Full Payment Submission (FPS) on or before the date of payment.

 

 

 

 

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interesting

@arowson. thanks

However, i would expect all directors to be earning at least the LEL if that was the only employment??

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Payroll software

Any sensible payroll provider would set up a routine where you can do an RTI submission for multiple companies easily.

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below the LEL

As from next April, ALL employees, including those paid below the LEL need to be on the payroll.  Not sure if you have to have a PAYE scheme if all of your employees are paid below the LEL, but this new rule is going to cause a huge amount of work for one of my clients (or rather me) who employs lots of students (> 100) and pays them a few pounds from time to time.

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RTI needn't necessarily make life harder for below LEL cases

taxhound wrote:

As from next April, ALL employees, including those paid below the LEL need to be on the payroll.  Not sure if you have to have a PAYE scheme if all of your employees are paid below the LEL, but this new rule is going to cause a huge amount of work for one of my clients (or rather me) who employs lots of students (> 100) and pays them a few pounds from time to time.

 

If the company has no employees above the LEL in any week, *and* P46s are held for all employees with boxes "A" or "B" ticked (ie you have a declaration from them that this is their only job), or you hold P38S for them (P38S is obsolete from April 2013) then you don't need a PAYE scheme. The moment a single employee exceeds the LEL in any week, or a single employee ticks box "C" on their P46 or refuses to tick any of the P46 boxes, you must have a PAYE scheme and report all employees, regardless of pay levels, to HMRC. This is already the case.

That reporting of the employee earnings is currently either a P14 or P38A at year end (so you already need to accumulate payment figures for the low paid employees and students so that you can do their P38A entry). From April 2013 the reporting will be an FPS for everyone on every payment if the employer has a PAYE scheme. You won't need to think about the status of employees once you've got a PAYE scheme; just pay them all the same way, and (I guess) whatever payroll solution you use will file them all.

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Why is it difficult?

if you use a payroll package?

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Agreed

petersaxton wrote:

if you use a payroll package?

I agree. I cannot see why this will be difficult.

I use 12Pay and it already queries HMRC for me for coding notices and populates the software at the click of a button... I don't see why it won't just do the RTI submission at the click of a button too..

Maybe the regular 12Pay rep can confirm - I never read m update release notes :p

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"The Regular 12PAY Rep" responds... :))

cparker87 wrote:
petersaxton wrote:

if you use a payroll package?

I agree. I cannot see why this will be difficult. I use 12Pay and it already queries HMRC for me for coding notices and populates the software at the click of a button... I don't see why it won't just do the RTI submission at the click of a button too.. Maybe the regular 12Pay rep can confirm - I never read m update release notes :p

Indeed, We're setting up 12pay payroll software so that the process of completing a period (ie notifying the software that you're happy with that week/month's figures) automatically files the RTI submission. So essentially the additional software workload resulting from RTI in the most common scenario will be an additional click per week/month to agree the submission. Clearly at the Bureau/Practice end there may be more operational workload resulting from agreeing the submission with the client (as you would currently do with P35/P14) unless due to the continuous nature of RTI filing you get prior agreement that if the client doesn't query the payslips and assorted payroll reports they're implicitly accepting the RTI submission that goes with them.

Automatically filing numerous employers/clients simultaneously would be more problematic in our opinion, because unless they all happen to have the same payment cycle that idea would be broken by the HMRC requirement that RTI payment submissions must be filed *before* the payments to the employee.

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Multi company tasks

When doing a payroll year end with Sage I can do various tasks in one go with multiple companies. I would think that if you agree gross pay and payment dates in advance with clients who have simple payrolls then you could use a multi company task if your software provides it.

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Not difficult, just very time consuming and tedious
petersaxton wrote:Why is it difficult

if you use a payroll package?

At the moment, I have c 75 companies where the directors pay themselves £624 per month.  I checked back in April and set up the payroll for the whole year when I transferred over from the previous year that there were no deductions - if there are any clients on a tax code where there are deductions they have to be dealt with individually (and I have quite a few of these too).  But these 75+ clients require minimal attention from me during the year unless HMRC change their tax code.  Once a quarter, I report them all as having no payment to make on HMRC's website (a tedious half hour of cutting and pasting references from a spreadsheet into HMRC's website) and then that is it until P35 time in April.

Under RTI I will have to open each individual company in my software and file the pay details once a month.  I reckon this will take a very tedious half a day a month if I am lucky.  This is half a day a month that I do not have spare at the moment, so yes, it will be a pain in the xxxxxxx.

As you have to file before or on the day that they pay themselves, I guess I will have to file for the whole month on the 6th of every month as I do not know exactly which days my clients pay themselves.

Should I get authority from them each month before filing?  Probably, but given how much time it takes to chase round after P35s once a year (and only just get the last few in before 19 May) I can't see this side of it working at all.

And on those clients where I do proper monthly payslips with deductions etc, I will now have to revisit each client to press the submit button, after I have chased the client for approval, which knowing several of my clients will be a few days after they actually make the payment.

 

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.

@tax hound I have having very similar thoughts on how to manage it.

I tend to ask clients to pay annually rather than monthly but this then leads to 11 periods of nil and one period of pay. 

HMRC focus appears to be at the bigger end of the market with 'proper' payrolls but I would be staggered if the small ones are not more numerous than the 'proper' ones in terms of pure numbers so I would hope they wake up to this point. 

I did read about the ability to make employees essentially dormant which is probably the answer, ie make the lot dormant, then run either with the year end work, with SA or in March depending on what works and not worry too much about if its the actual month they got paid in or not. So long as the totals add up for the year it ought to work for 2013/14 at least. 

The suggestion above of some sort of panel when you could select which companies you want to run in one go would be exactly what you need if you really do have to run everyone every time. Using moneysoft my assistant would have to go into each one every month, and whilst it might only take a couple of minutes a couple of minutes * 75 odd payrolls = a good half day of titting about which would be the best part of a weeks wages a year for essentially a worthless task over the year.  If this could be reduced to a few minutes with good software design it would be worth switching for......***big hint to software co.s reading this!****

 

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Yes Please - FAO Moneysoft

Thanks Ireallyshouldknow...

If Moneysoft are reading this, please - if we can select a group of (say) 75 clients for whom we can bulk file each month without having to open each one individually my day/week/month/year would suddenly seem very very much happier.

Presumably I would also not need to mess about with the quarterly nil payments any more too :)

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We (Moneysoft) have been working on this for some time now..

..and will have something in place by April which will allow for the submission of RTI returns in bulk (i.e. for multiple companies) without the need to open and close each data file.

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I'm not sure that HMRC will be able to accept bulk filings as hoped for by taxhound. We may all be reduced to filing each payroll individually on each payday.

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St Bruno

St Bruno wrote:

I'm not sure that HMRC will be able to accept bulk filings as hoped for by taxhound. We may all be reduced to filing each payroll individually on each payday.

Why would they know? The software will do the filing individually after the accountant does one bulk submit.

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Taxhound

 

I ask the directors to only have one payroll run a year as it is cheaper for them. If they want a payroll run monthly I charge them more.

You wouldn’t have to open each individual company if the software has a multi company option. I will think that once one payroll package does it then accountants will flock to it if other packages don't offer it.

I would agree the gross pay amount in advance and say you need one month’s notice to change it.

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could maybe do two filings a year...

But you have to file in advance of them taking the pay, so one pay run a year would need to be on 6/4 and then a standard tax code would only give 1/12 of the personal allowance.  Or two pay runs - one covering from 6/4 to year end and another from day 1 of new accounting year to 5/4, but we still have the same tax code issues.

Yes, those organised clients with a healthy director's account could have their pay run on 31/3 but how many clients have sufficient funds in the company to be able to draw down on their loan account while waiting for pay day?

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Annual pay intervals

taxhound wrote:

But you have to file in advance of them taking the pay, so one pay run a year would need to be on 6/4 and then a standard tax code would only give 1/12 of the personal allowance. ... <snip>

 

Not if your software supports annual pay intervals.

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Dividends

"Yes, those organised clients with a healthy director's account could have their pay run on 31/3 but how many clients have sufficient funds in the company to be able to draw down on their loan account while waiting for pay day?"

They can take dividends for profits in the year.

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Tom

Taxhound is right. You only get one months personal allowance in the first month.

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Oh dear, has HMRC got CGW2 wrong?

petersaxton wrote:

Taxhound is right. You only get one months personal allowance in the first month.

 

Someone should tell HMRC that, then.

http://www.hmrc.gov.uk/guidance/cwg2.pdf

Page 8.

hmrc wrote:

Yearly
Earnings period is yearly
...
Using a code on a cumulative basis
Use the table for month 12.
...

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@ Peter and Tom

@ petersaxton For the organised clients, I agree, but those who live hand to mouth they won't be able to save up for the final salary payment in month 12 AND take dividends.

@Tom McClelland - yes, I agree you could do annual pay intervals, but if your year end is not 31 March that will mean the salary will be distorted in the first year as I have always worked on a monthly basis.  It also means that if the client's circumstances change part way through the year you will be stuck with the whole salary up front which may not be appropriate, so I am not keen to do this.

Maybe I am nitpicking, but I can see all of these issues popping up through the year and causing problems.

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Taxhound

"those who live hand to mouth they won't be able to save up for the final salary payment in month 12 AND take dividends."

I agree but given the salary is not very great I don't see it being a problem for the vast majority of my clients and they are not exactly high net worth individuals.

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Apologies

I really didn't know that.

Unfortunately, there could be a problem if you later wanted to change the situation.

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.

That's a relief Richard, I didnt want to have to switch away from your product which is perfect for us at the moment. 

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thanks for owning up @Peter i didnt know that either

as for left hand right hand @HMRC all fingers and no thumbs

also thanks to Moneysoft for the bulk filing comment

you cant stop progress or fools rushing in ....

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Thank you Moneysoft!

You have brightened up my afternoon!! :)

 

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reporting hours worked

Just had a call from IRIS who said that under the new RTI system you have to report the amount of hours worked and that directors must be paid at least minimum wage for those hours.

He said RTI is the end of typical £624 minimum salary and balance via dividends extraction method that most small companies use.

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Large claims require evidence.

<a href="mailto:[email protected]">[email protected]</a> wrote:

Just had a call from IRIS who said that under the new RTI system you have to report the amount of hours worked and that directors must be paid at least minimum wage for those hours.

He said RTI is the end of typical £624 minimum salary and balance via dividends extraction method that most small companies use.

 

Do they have an authoritative citation backing up that claim?

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Hmmm...

tim @ charlesaccountancy.com wrote:
Just had a call from IRIS who said that under the new RTI system you have to report the amount of hours worked and that directors must be paid at least minimum wage for those hours.

He said RTI is the end of typical £624 minimum salary and balance via dividends extraction method that most small companies use.

Misleading statements from vendors to increase sales - who'd have thought it....

 

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.

I would ask the question "so when did the minimum wage rules change?"

RTI is merely a collection of data issue, not a change in the underlying legislation.

 

 

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IRIS are wrong

Only directors who have a contract of employment are entitled to the NMW.

Of course gov.uk got it wrong and says "company directors" are not entitled to the NMW.

https://www.gov.uk/your-right-to-minimum-wage/who-gets-the-minimum-wage

The latest advice is as follows:

 

"The national minimum wage does not apply to company directors

unless they have contracts that make them workers. Company

directors are office holders in common law and can do work and

be paid for it in that capacity. This is true no matter what sort of

work is done or how it is rewarded.

However, company directors who also have employment contracts

will need to be paid the national minimum wage for work done

under that contract. If a company director is unsure whether he

has entered into an employment contract with his company he

may wish to take independent legal advice."

http://webarchive.nationalarchives.gov.uk/+/http://www.berr.gov.uk/files...

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