Employment allowance - do we bother adding spouses as employees?

Employment allowance - do we bother adding...

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The employment allowance is no longer available to companies where the director is the sole employee. Ignoring the ambiguity about the second contributor as discussed on AWeb yesterday for a moment - i.e. assuming the gov.uk guidance is wrong, this can theoretically be easily circumnavigated by a director adding a spouse to the payroll, paying them say £10 per month for one hour's admin work. 

Is it worth the hassle? A saving of approx £200 per year, offset by some additional payroll costs and the risk that the company is challenged to demonstrate the one hour's admin work has actually been done.  

What are people advising their clients on this? Do it, or don't bother? I'm inclined not to bother.

Replies (6)

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By SteveHa
08th Apr 2016 10:33

I'm not even going to bring it up. Most of our single director only payrolls don't take enough salary to incur a liability to secondary NI anyway, and so nothing to save.

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RLI
By lionofludesch
08th Apr 2016 10:46

None

I have no single director, no employee companies but, imho, the second employee/director needs to earn enough to be charged to secondary Class 1 contributions, though I accept that the wording is unclear and capable of other interpretations.

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Sarah Douglas - HouseTree Business Ltd
By sarah douglas
08th Apr 2016 12:46

Pillowman Posted this on another question might help

"Has everyone else seen this new updated guidance from HMRC on Employment Allowance and how even 2 director firms are not eligible for Employment Allowance unless they are both being paid over the secondary threshold.  Or if you have lots of low paid employees, the director would not be eligible for Employment Allowance if he was paid over the secondary threshold.  It will affect the salary levels that we are advising our clients (who are directors) to pay out this year and this advice has changed since we asked our tax helpline prior to 5 April 2016!!

New guidance can be found here - https://www.gov.uk/government/publications/employment-allowance-more-det...

It's not as simple as just the number of employees as ever..."

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RLI
By lionofludesch
08th Apr 2016 12:56

Eccentric

Yes - there's seems to be some dichotomy between the law and HMRC's interpretation but I'm not sure whether it's worth dragging through the courts.

This is small beer .....

Sure - if you've a director on £25000 salary, by all means sign up that extra employee.

If he's on £11000, forget it.

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By Vaughan Blake1
08th Apr 2016 14:14

On the other hand

If the sole director is over pensionable age so no 'ees contributions.

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Replying to Tax Dragon:
RLI
By lionofludesch
09th Apr 2016 13:50

Everyone's different

Vaughan Blake1 wrote:

If the sole director is over pensionable age so no 'ees contributions.

True, it's another factor to take into account

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