Any Answers (back to index)
No PAYE scheme but possible P11d
Posted by Anonymous on Thu, 28/01/2010 - 20:49
Have a new client (one man limited company) in its second year of trading as a limited company (march 2010 year end). Has not yet registered for PAYE (salary below NI and Tax threshold) but does reimburse expenses to director. So looks like we will need to register for PAYE (submit nil returns) and complete and file P11d (although hopefully will get a dispensation) so again a nil return.
What responsibility would I have for the prior year (previous adviser)? am concerned that a can of worms may be opened with potential P11d needed for last year ie hefty penalties for late P11d (even if nil). Am i worrying unnecessarily? Would appreciate some comments?
thanks
Fred
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No PAYE scheme but P11d may be needed
Get it right from now on. There is no point in compounding the problem by letting it continue. Also, it is most unlikely that HMRC will look back into previous years. To safeguard the clients future state pension provision, you should`pay him a salary up to at least the NI threshold and report it on the annual P35 (unless he has other earnings to cover this)
Directors P11D
The "note to employer" on form P11D states that P11D should be completed for a director or employee earning at a rate of £8500 a year or more to 5 April.
If the director earns less than this (including expenses and benefits) then completion and submission of P11D is not required.
However, if the benefits and wages exceed that figure then completion and submission of the P11D will be required!
thanks
Cheers for the replies -
PAYE registration in progress...hopefully dispensation will follow to alleviate admin pain!
Anon - unfortunately exemption for directors earning less than £8,500 only applies if a full-time working director with no material interest in the company. There is also a charity exemption but neither is applicable in my case.
Fred
You may want a PAYE scheme
I would think about paying a salary of £100 per week to ensure that you are entitled to basic state benefits. Then apply for a PAYE dispensation, you can do this online for expenses and this should preclude the need for a P11D.
Look back on Any Answers for a previous posting where I discussed the problem about not filing P11Ds for earlier years (I will try and add a link when I find it).
Virtual Tax assistance for accountants, check out: www.rossmartin.co.uk
Is a dispensation worth it?
I have considered applying for dispensations on the grounds that I check all my clients' expenses, but I do not really want the responsibility for doing that checking unless I am getting paid for it, and the chances of my persuading the client that (s)he should pay for it are sufficiently close to zero for me not to bother trying.
a director or employee earning at a rate of £8500 a year
I have had a person at HMRC explain to me that the term "a director or employee earning at a rate of £8500 a year"
means a P11D should be submitted by a) a director & b) an employee earning at a rate of £8500 per annum, not "a director earning over £8500 or an employee earning over £8500 -
and that all directors should submit a P11D even if it's nil
any comments
Re Jean Reeve
I had always thought it the way that HMRC explained to you - given that a director can manipulate their own remuneration. Not very many of my directors earn more than £8,500, but I haven't for one minute tried to treat them the same as an employee earning less than £8,500.
Also, to answer the questions about dispensations being worth it - I think so. About this time of year, I send out the P11DX and a word document explaining it to new clients gained in the year, ask them to complete, send to HMRC, and (usually) receive a dispensation backdated to the beginning of the tax year.
Dispensations
You still get some tax offices being awkward about granting dispensations to one-person companies, despite the fact that officially they are OK. And quite often they exclude business entertaining on the rather silly grounds that no one else can check them (same goes for travel & sub too) so you might still have to file a P11D.
Another thing to watch for is clients claiming expenses for ineligible items such as home telephone, travel to work, petrol rather than mileage, annual travelcards, regular and lavish "staff" entertainment, mobile phone contracts not in the name of the company, etc. These should all be P11D (or PSA) items and a dispensation could lead to penalties for unreported taxable benefits.
Overdrawn loan accounts are another danger area. Always make sure there is an internal adjustment for interest at the official rate (currently 4.75%).
Chris F
You might find this useful!
You can as an acountant offer the service to your clients with no upfront costs works well.
just a thought hope it helps!!!
PAYE and P11d
Is there any point in paying NIC if a client has already got 30+ years national insurance record
Directors & benefits
If you have not read HMRC's 480 booklet then I would suggest putting the phrase in a search engine or on HMRC's website.
The conditions for the submission of a P11D rather than a P9 are in chapter 1, i.e. controlling directors are always treated as requiring a P11D (if benefits are paid) irrespective of earnings below or above £8,500. Also if the spouse has a company car without taking a wage the benefit can be assessed on the director even if both of them earn less than £8,500.
The booklet also contains a chapter on dispensations however HMRC are still wary of granting a dispensation for one man bands. However, unless you try you will not know.