Director national insurance & AEP
I have a nasty suspicion I already know the answer to this question but hopefully someone might be able to point me in an alternative direction.
A colleague and I are co-directors of a start-up and have been since inception in Nov-10. The Company has only been in a position to pay salaries to our one employee and the two directors since Jul-11 i.e. from month 4 of this tax year. Prior to this, we were all working for free.
From July 11 to date, we have all been paid regular monthly salaries and basing the PAYE and NI contributions on the outputs from the HMRC Basic PAYE Tools software. Within the software, we have set the two directors to pay NIC's as if they were employees (we had originally believed this to be the most prudent approach). Having now prepared the last payroll run for this tax year (31 Mar 12), I see that the directors are now required to pay additional national insurance contributions as we are being assessed for national insurance based upon annual earnings (under the AEP) rather than month by month earnings as a normal employee would be. i.e. we are effectively expected to pay NI for the 3 months at the beginning of this tax year when we couldn't take salaries.
Is this assessment correct as it means the directors will be paying NI for the 3 months when they were unpaid and working for free whereas our employee only pays NI for the months that they were being paid salary? Is this a fault of the software not allowing for unpaid months or should I have set the software to show that we were only became directors from Jul-11 (i.e. when we starting getting paid) and therefore the NI would pro-rate and we would be treated no differently to an employee?
I know this is rather involved but I hope somebody can help as I'm waiting for a call back from HMRC but given how busy their call centre is, I'm not holding my breath.
Thanks in advance!
- VAT BOX 6 & 7 errors 24 2
- Sage payroll 618 13
- Consortium relief and bad debts 77 4
- PAYE coding notice - deliberate misstatement 966 17
- VAT Option to tax 341 7
- Late P800 demand shows later year? 241 13
- Laptop purchase 1,548 21
- Entrepreneurs Relief 62 2
- CVA guidance 104 2
- BEST CPD COURSE 93 1
- Total cost of employment 270 3
- Accountancy software for an imac 258 6
- PAYE Coding Notices 522 10
- directors loan movements and repayments 240 3
- VAT registration for "co-operative" formed to provide flood defences 61 1
- Business travel apps 75 2
- EIS - connection through employment 65 1
- Weely paid employees 338 4
- Payroll - Previous year not filed 131 2
- Help car benefit 213 5
- Residential Property Purchase Above £750K 891
- Using Sage with Sofa Categories 624
- Free Tax Legislation? 382
- Director Loan account operation 379
- Non-Resident Director - UK Tax Position? 326
- transferring simply accounting 2010 from xp to windows 7 307
- Understanding the implications of January 2015 VAT changes for downloads on threshold for VAT registration 303
- Sage 200 and Access Dimensions reviews 276
- Paye procedures for CVA 208
- rent-a-room allowance for part of the year 200