Directors exempt from AE?

Directors exempt from AE?

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We outsourced to an independent AE specialist. I have seen today (and had it confirmed by an unsure sounding person on the AE helpline) that companies with more than one director but who have no employment contracts are exempt. Our independent AE has been telling these people they aren't exempt. I am getting conflicting advice. None of our people have employment contracts (I am talking of two person companies where they are the owners). If anyone has a cast iron answer to this it would be appreciated.

Yvonne

Replies (20)

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By yolo rolo
29th Jul 2015 16:14

That is what started our dilemma

Thanks Peter, we have seen that and that is why we are now confused. Very few, if any, directors of small owner manager type companies would have an employment contract and certainly here that will mean in addition to the one person company (who we now are exempt) that 80% of our other clients are too. However, the independent AE says this is not correct and that they need to be in the scheme or opt out. Even opting out is hassle so I would far rather they are exempt.

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Portia profile image
By Portia Nina Levin
29th Jul 2015 16:18

Get another AE adviser
If the "employer" does not have any "workers" there cannot be any obligation to auto enrol. Worker has a definition: http://www.legislation.gov.uk/ukpga/2008/30/section/88 How is the independent AE specialist remunerated, incidentally?

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By petersaxton
29th Jul 2015 16:19

What can I say?

That's what the Pensions Regulator says so ask the "independent AE" for their source.

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By ireallyshouldknowthisbut
29th Jul 2015 16:48

.

Whilst they may be exempt, you still have to opt them out of the clutches of the regulator or they will start rolling with the fines eventually. 

There is a link at the bottom of the page Peter links to. 

However it takes hardly any time, and you wont need your "expert" to do it for you. 

had enough of those clogging up Aweb in recent weeks. I think they are getting a bit jittery as the forecast numbers of people needing their services has not quite come to fruition given its just not that hard to do for a micro biz. 

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By yolo rolo
29th Jul 2015 17:10

thanks

Thanks for your help

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By Roland D
30th Jul 2015 12:05

.

The difficulty in getting a straight answer from anyone on this matter is that, whilst there may be no written contract of employment, there may be a deemed contract.  Here we enter a very grey area, where the receipt of regular payment by a Director or Secretary could in theory mean there's a deemed contract.

For what it's worth, my firm has made a policy decision that we will treat such Directors as exempt, after explaining the position to clients who are at liberty to decide not to seek exemption.  It seems inconceivable that the Pensions Regulator would go after all the companies who took this view as they'd get bogged down in litigation.

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By goldriver
30th Jul 2015 12:45

This what we have told our clients
 If you are an ~employer you will be receiving a letter from The Pension Regulator advising you of your pension staging date for your automatic enrolment legal duties.

The position regarding Director only business and #AutomaticEnrolment  

When you receive the letter from the #PensionRegulator   you will need to supply the following information to confirm to The Pensions Regulator that there are only directors in the company, none of whom are workers for the purposes of automatic enrolment and to send an email to the #PensionRegulator   stating the following:
 
1. I confirm that [company name] is a not an employer for the purposes of automatic enrolment for the following reason – (select one option from the list below):
a)    there is only one director and there are no other staff working for the company
b)    the only people working for the company are directors and none of them has an employment contract
c)     the only people working for the company are directors and only one of them has an employment contract 
d)    the company has ceased trading (including date ceased)
e)    (if there is some other reason why you believe you do not have any automatic enrolment duties, please provide a brief explanation) 
 
2.  The letter code for the company is: [The letter code is a 10 digit number which can be found on all letters sent from The Pensions Regulator]
3. The PAYE scheme(s) reference is: 
4. The companies house number (where applicable):
5. The name, email address, address and telephone number of contact at the company.
If the company’s circumstances change so that there are at least two people working for the company under contracts of employment (whether directors or other staff) then you will need to inform us of this as soon as possible.

Contact http://www.absl-accounts.co.uk/ who can help you with your legal duties in respect of automatic enrolment

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By Kazmc
30th Jul 2015 15:38

.

TPR Will not accept emails anymore, you have to use this link.. https://automation.thepensionsregulator.gov.uk/notanemployer

 

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paddle steamer
By DJKL
30th Jul 2015 17:39

Flag post to retain thread link re AE and directors

NM

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By SteveB@LPAES
31st Jul 2015 13:00

Exemption is entirely possible for companies with no employees or directors and office holders only such as Company Secretaries.

The definitions stated above by goldriver are a good example of this and Ishouldreallyknowthis is correct in that it take a short time to communicate this toe The Regulator when it is relevant.

It will always be the employers responsibility to confirm that they meet one of the set criteria and to inform The Regulator if there circumstances change in the future. 

This part of the legislation is relatively simple and I would also agree with earlier comments that maybe its time to change AE adviser??

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By john cottam
31st Jul 2015 13:03

AE

If there is any doubt surely the directors could simply opt-out, and make a diary note to do it again in 2 years

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By Kazmc
31st Jul 2015 13:09

@SteveB@LPAES

Hi Steve

With regards to 'opting out' if there is a Director and company secretary, which statement would you think accurately describes this scenario from the following options on the TPR link when advising no AE duties?

 

Reason you're not an employer

Please choose one of the options below to confirm the reason you're not an employer. *

 

There is only one director and there are no other staff working for the company.

 

The only people working for the company are directors and none of them have an employment contract.

 

The only people working for the company are directors and only one of them has an employment contract.

 

The company has gone into liquidation.

 

The company is dissolved on the Companies Register at Companies House.

 

The company has permanently ceased trading.

This option is for non UK registered companies and partnerships who are not registered on the Companies Register at Companies House.

 

Doesn't really make things very clear

Thanks for any advice

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By SteveB@LPAES
31st Jul 2015 13:17

Exemption

First lets be clear this is not Opting Out. Opting Out is another process altogether and is nothing to do with exemption. Sorry if that sound pedantic but I want to be sure we all know what we mean as Opting Out is much more complex, applies to employees who have been enrolled only and can lead to substantial fines if done incorrectly.

The first definition is the closest but as you are not necessarily asked by the regulator to choose anymore then a simple acknowledgement that you have no employees should suffice.

 

 

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By Kazmc
31st Jul 2015 13:28

@SteveB@LPAES

That's great thanks Steve.

Yes aware that opting out in terms means employees choosing to opt out of the scheme just couldn't remember the correct terminology for having no AE duties!

I think the whole Company Secretary scenario is a rather grey area. Most of the company secretaries on our client payrolls receive the same 'salary' as the directors which could cause problems?

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By seonaid anderson
31st Jul 2015 13:36

wider effect?

Is no one worried about the implications of claiming the exemption from auto enrolment by the directors not having a contract. E.g. entrepreneurs relief - full time working , Tax free redundancy etc.??

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Euan's picture
By Euan MacLennan
31st Jul 2015 14:31

Yes, but ...

@SteveB

If you consider that a company secretary is an office holder and so, not a worker for AE pension purposes, which box do you tick on the TPR website to claim exemption?  Three of them mention directors, but none say 'directors and company secretaries', and as far as I can see there is no footnote to the effect that 'directors includes company secretaries'.

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By John R
31st Jul 2015 16:04

Entrepreneurs' relief

@seonaid anderson

A director or company secretary would be an "officer"  so why do you consider that entrepreneurs' relief would be in jeopardy?

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By Kazmc
03rd Aug 2015 08:37

Response from TPR

Had this response this morning from the TPR:

Our answer to your question is that where an employer is satisfied it has no workers, due to being managed by one director and a company secretary, who is acting in that capacity alone ie an office holder then the option to select is

 

There is only one director and there are no other staff working for the company.

 

Regards

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By SteveB@LPAES
03rd Aug 2015 08:45

Must have been a lucky guess!!

Good to see the whole thing is joined up and working well.

 

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