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!
- error on companies house accounts 727 18
- RTI penalties 84 1
- ACCA, ACPA, IFA, ICPA 515 7
- Bookkeeping software for cafe and VAT 143 2
- How do we get US withholding tax back? 308 5
- US Sales Tax 112 1
- Does SMP and SPP go up if leave goes across 2 tax years? 368 15
- Anti- Money Laundering - CIMA Practising Certification Application 199 3
- Simplified auto enrolment? 141 1
- Group Relief 130 4
- R&D Credits 104 1
- Is the annual Money Laundering Payment tax allowable 250 7
- VAT Reg.for sole trader with 2 S/E 127 2
- Clients 683 14
- Advice needed on my practice but not my clients 320 4
- Leaving the flat rate scheme 137 3
- Starting new accounting business 300 5
- Is a property owner charging a peppercorn rent to a limited company acceptable 464 10
- Sage Payroll 121 1
- SAGE 50 - Invoice Date 119 2
- QROP pension input amounts 501
- HMRC BENCHMARK EXPENSES 482
- write off loan or loan to equity swap or both 445
- EPS and CIS deductions 299
- Sole trade business in UK, but the owner works from EU 291
- Construction CIS LLP Company 284
- Stamp duty on house transfer between spouses 249
- Lets hear it for HMRC! 206
- SAGE winforecast 204
- LIVE: Budget aftermath webinar 187