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Director/Employee vs Employee re NI

Relinquish directorship to reduce NI liability

Small company, three directors, one salaried and two unpaid. Salaried director has calaculated that there would be a saving in NI if he were not a director/employee but merely an employee. I feel this would be challenged by HMRC as a 'deemed' director but could he relinquish his directorship and act as 'pure' employee? 

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24th Jan 2018 07:33

If the "director has calculated that there would be a saving in NI if he were not a director/employee but merely an employee" then his calculations are almost certainly wrong.

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24th Jan 2018 07:43

This premise seems hugely unlikely.

In fact, I can't think of a possible scenario where it would be so.

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to lionofludesch
24th Jan 2018 08:17

Employees might be paid less than directors.

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to Tax Dragon
24th Jan 2018 08:28

Yes.

That's probably it.

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24th Jan 2018 08:43

If he's the only one earning above the secondary threshold and he was a director = employment allowance can't be claimed.

If he was the only one earning above the secondary threshold and he wasn't a director = employment allowance can be claimed.

Claiming employment allowance = saving in NI.

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to Mr Hankey
24th Jan 2018 09:20

Putting = signs into it makes it a calculation?

But good point. They perhaps used to get EA and ss4A took it away in 2016/17.

Seems likely that ss10 will keep it taken away, don't you think?

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to Mr Hankey
24th Jan 2018 09:20

Mr Hankey wrote:

If he's the only one earning above the secondary threshold and he was a director = employment allowance can't be claimed.

If he was the only one earning above the secondary threshold and he wasn't a director = employment allowance can be claimed.

Claiming employment allowance = saving in NI.

That's true. But I wouldn't imagine this was the optimum solution.

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By Matrix
24th Jan 2018 09:14

But the other two Directors are employees so the company would be entitled to the employment allowance wouldn't it since it is not a sole Director payroll?

If you are concerned then just put the other two on the payroll and don't pay them anything.

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to Matrix
24th Jan 2018 09:26

Isn’t it that it doesn’t have to be a sole director company, just that the only employees are director’s in order for the NICs allowance to be disallowed?

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to Matrix
24th Jan 2018 09:27

Matrix wrote:

But the other two Directors are employees so the company would be entitled to the employment allowance wouldn't it since it is not a sole Director payroll?


I don't think so. Read ss4A. So:
Matrix wrote:

just put[ting] the other two on the payroll and [not] pay[ing] them anything


won't help.

(Paying them something might.)

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24th Jan 2018 09:46

Maybe BayTree would liked to invest a little time into expanding on his qauestion, rather than have us come up with hugely unlikely scenarios.

Clearly, these directors must be getting paid a decent wedge. If they weren't, there'd be next to no NIC to claim Employment Allowance against anyway!!!

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By Matrix
24th Jan 2018 09:53

I just think that this is not one of the situations targeted by the changes and so would look into the exact wording which has been discussed here before. Even on gov.uk it says if you are "the" Director and the only employee paid above the secondary threshold. Assuming this is a genuine business and the other Directors have not just been added to circumvent the loss of the EA and he is paid a proper salary then I wouldn't just assume that the EA can't be claimed but would spend some time on this.

Losing Director status for a small saving seems imprudent.

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