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Is a payroll scheme needed?

Sole director/shareholder remuneration

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Hi,

Can someone point to any legislation on this? Does a company with one shareholder/director doing consultancy need a payroll scheme if just extracting dividends from the Company. Accountant colleague says Company needs a payroll scheme and pay minimum wage (£8.6k salary earned elsewhere through 'proper' employment)I think not, as only shareholder/director so exempt. Who's correct?

Thanks

Matt

Replies (7)

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RLI
By lionofludesch
03rd Sep 2019 11:23

Sounds like you've misunderstood the advice.

You don't need a payroll scheme if there is no salary or benefits.

Whether it's a smart move is another matter which would depend on personal circumstances which you do not disclose.

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Replying to lionofludesch:
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By MDK45
03rd Sep 2019 11:29

This is how I understand it as well.

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By Matrix
03rd Sep 2019 11:45

I can’t think of a situation where it would be more beneficial to take dividends instead of a Director salary up to the primary threshold.

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Replying to Matrix:
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By MDK45
03rd Sep 2019 11:49

Because the salary is earned elsewhere with an employer and actually a lot more than £8.6k so the mix isn't optimal.

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Replying to MDK45:
Caroline
By accountantccole
03rd Sep 2019 12:31

But if the co makes profits (which it must be doing for divis) then it will save CT on salary. Normally the CT savings - Personal tax paid is a lower % than the dividend tax.
No NI if they only pay up to the NI limit.
Obviously depends on the overall situation so they ought to be taking advice

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By David Heaton
03rd Sep 2019 12:26

You need a payroll reference for P11D and Class 1A reporting, but not for PAYE if you're paying no wages that attract tax or NIC. You don't need to pay NMW if the shareholder-director is the sole employee. You don't need to auto-enrol for pensions.

If you take on a casual worker directly (eg, the sole director's spouse or partner), even for a few hours, you need a payroll. There may be no NIC to pay, but the tax code will probably be BR, so you need to do RTI reporting on or before payment. Once in RTI, you can register as an annual scheme, so you only need to submit one FPS per year (provided you don't start paying the director or someone else regularly).

Given that this is a second employment for your client, and the primary PAYE code will sit with the other employer, even a small payment of earnings will attract PAYE @ BR, so RTI would need to be operated, at least until HMRC issued a code splitting the personal allowance across the two sources.

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Replying to David Heaton:
By Duggimon
03rd Sep 2019 13:32

David Heaton wrote:

You need a payroll reference for P11D and Class 1A reporting, but not for PAYE if you're paying no wages that attract tax or NIC.

That's not true, if you have any employees you pay wages to above the LEL (which may not attract tax or NI) or if you pay anyone who has employment elsewhere, even if their wages are low enough there's no tax or NI, you still neet to operate PAYE.

If the person in the OP pays no salary at all, they don't need a PAYE scheme, if they take any at all then they do.

Unless of course this is another part of HMRC guidance they made up without any legislative backing. I don't think it is though.

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