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!
- New Employers Helpline 167 4
- Limited company director - other earnings in the tax year 137 3
- Software recommendations 229 1
- Share transfer question 349 17
- Land Rover Discovery 3.0 SDV6 255 Comm Auto 2 seat 280 7
- The stupidity continues 331 10
- qualifying for 1/9th tax credit on foreign dividend 143 2
- HMRC & daft penalty 2,385 19
- Overlap relief 747 19
- What is IRIS World like? 343 8
- Pension contributions 358 10
- Offsetting CT losses against another company 134 4
- Do you have to declare business expenditure on a personal credit card on your P11D? 474 11
- Do you use sign up lists on your website 162 1
- CIMA at the age of 35?? 462 9
- Setting up PAYE scheme without UTR 256 8
- Free project management software with Gantt charts, preferably on-line 201 1
- If you've had any issues posting: Please read this 557 10
- Budget 2015 - take two 223 3
- CIS Contractor has not issued tax deduction certificate to client 216 4
- Has anyone been affected by the RBS payment breakdown? 433
- Straight line write off of Purchase Goodwill ??? 428
- WIP Software 292
- FRS 102 compliant illustrative accounts for an insurance company 286
- No payroll scheme in place 226
- CGT, PPR and transfer of equity to spouse. 224
- Do subcontractors on work for residential (student accomodation) construction 204
- Is there anything wrong with this? 196
- Small Part Disposal of Property 177
- Uncommercial property business 173