Blogger
Share this content
0
10
4870

RTI - recording director's hours

Like most small to medium practices we have a lot of limited companies where the directors take minimal salaries.

One of the new bits of information now required on payrolls is the contracted/usual hours for each employee / directors.

The dilemma I have (based on trying to second guess what HMRC will be looking at) is;

1. Do we record the directors contracted/normal hours (how many directors have contracts as such??) meaning that they are receiving lower than the minimum wage - I would think the answer is a definite NO here
2. Do we put say 15 hours per week? But this would mean that most would still receive an hourly rate well below a commercial level. Also what if the directors working hours could be proved, say they are a private doctor?
3. Do we say the hours are not known and just put a 0 in the relevant box.

Are HMRC bothered about this? If they are which of the above options are more likely to cause 'issues'?

I would appreciate your thoughts on this

Thanks

PS. I'm sure most of you are sufficiently client focused, but please no answers like 'they should already be paid the commercial rate'.
 

Replies

Please login or register to join the discussion.

Amount paid / Roundup(Minimum wage) = Hrs Worked

.

Thanks (0)

DWP

The hours information is (or will be) passed on to DWP, where it forms part of any calculation for benefit entitlement.

Thanks (0)

Directors not entitled to minimum wage

https://www.gov.uk/national-minimum-wage/who-gets-the-minimum-wage

 

under the 'Not entitled to minimum wages' it states Company Directors - and so as I would understand it you can put the hours in that you would work.

But then this could be read that a director is either not paid at all or only receives the minimum amount.

Thanks (0)

Tax Credits

The three hours brackets,

0-15.9999

16-29.999

30+

Determine entitlement to Working and Child Tax Credits.

 

My view is "be honest" and tell the truth - which of the three brackets applies to a particular director - I don't see any "planning" to do here unless a director is perhaps borderline 15/16 hours or 29/30 hours when such a director might be askled to be more precise as to working hours and ensure that admin hours are included and, if needbe, work a little bit longer each week if hovering at one of the crucial hours points (15/16 hours, 29/30 hours).  Then see what follows.   Maybe HMRC begin to query "Director Salary too low for hours worked"?

 

 

 

Thanks (0)

There is another...

DMGbus wrote:

The three hours brackets,

0-15.9999

16-29.999

30+

Determine entitlement to Working and Child Tax Credits.

 

My view is "be honest" and tell the truth - which of the three brackets applies to a particular director - I don't see any "planning" to do here unless a director is perhaps borderline 15/16 hours or 29/30 hours when such a director might be askled to be more precise as to working hours and ensure that admin hours are included and, if needbe, work a little bit longer each week if hovering at one of the crucial hours points (15/16 hours, 29/30 hours).  Then see what follows.   Maybe HMRC begin to query "Director Salary too low for hours worked"?

 

There is a fourth hours bracket, which is 'Other' and if there is no recognised 'number of hours the employee is expected to work per week' then 'Other' is a perfectly acceptable response. 

As mentioned above, this information is not going to be used to assess minimum wage requirements, it is to be used as part of the assessment for tax credits.

Thanks (0)

There is another - what effect on tax credits?

DMGbus wrote:

There is a fourth hours bracket, which is 'Other' and if there is no recognised 'number of hours the employee is expected to work per week' then 'Other' is a perfectly acceptable response. 

As mentioned above, this information is not going to be used to assess minimum wage requirements, it is to be used as part of the assessment for tax credits.

If using the hours bracket 'Other' what effect would there be on Tax Credits?
Thanks (0)

More credit than they deserve?

Given how difficult HMRC finds it to co-ordinate its backside and its elbow at times, it's asking a lot for it to take some very vague numbers and use them for any kind of in-depth, avoidance hunting analysis.

Like DMGbus has said, the hours bands are on there simply to co-ordinate the tax credits position - at least for the time being.

 

Thanks (1)

RTI - As clear as mud

This issue has come up before:

http://www.accountingweb.co.uk/anyanswers/question/directors-hours-rti

Directors Hours (19/11/12)  Squay wrote :

"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."

 

http://www.accountingweb.co.uk/anyanswers/question/rti-directors

RTI for Directors (1/11/2012) Peter Saxton wrote:

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...

 

This advice seems to contradict some of the comments above.

Thanks (1)

Employment Contract

There might be another issue here.

 

A company director who purposefully set things up so that he doesn't have an employment contract and then admits to working long hours on his PAYE submission, might then have a hard time arguing that he didn't in fact have an implied employment contract.

 

In my personal view, I would not be at all surprised to see this used in future against Co Dtrs in the quest to raise taxes without creating headlines.

Cube

 

Thanks (0)

legislation (SI 2003/2682 Sch A1 s21) says:

An indication of which of the following bands the number of normal hours worked each week by the employee falls into–
(a)    up to 15.99,
(b)    16 to 29.99,
(c)    30 or more,
or an indication that none of the bands is applicable.

There is no mention of 'contracted' hours.

It does refer to 'employee', and I imagine a 'working director' must count as an employee for these purposes (even where he/she has no written employment contract and so is not subject to NMW).

Thanks (0)