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Rti submissions needed for a directors payroll

Rti submissions needed ?

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I work in industry for a director who has taken 'salary'  up to the threshold in 2010/21 tax year and 21/22 tax year,  ie, between the Lower Earnings Limit and the Primary Threshold for wages.   The year end date is the 30th September 2021.    I say "salary"  because it was just a money transfer with no payroll run for him at the time.

It is my understanding that Rti submissions should have been made at the time ,  on a payroll system,    for him to be able declare the 'salary'   -  in reality, monies was taken and put into a loan account,  and he now wants to declare this as salary for the accounting period.       His suggestion is that  no previous Rti submissions are needed but I thought this had all been tightened up even for those on low salaries?   I have only worked here for about 6 months so I don't know what happened in the last years accounts yet.     I prepared the TB to be told there should be a journal to show directors salary - that's all I know ,  apart from there is no payroll run with his name on it.     I did ask if this was an accrued salary/bonus but again this would need an Rti submission at some point ? 

This hasn't got as far as the statutory accountants preparing the accounts,   who have also changed this year,    but I've never heard of anybody putting a salary to the accounts retrospectively without any Rti submissions.    Is there any situation where this is possible ?

I don't think he can do it but he seems convinced he can .     And surely if he were to now declare Rti's there would be a many penalties on this ? 

Any pointers please. 

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By MCV71
22nd May 2022 18:10

You're correct, it should have been reported at the time through RTI submissions

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By Hugo Fair
22nd May 2022 20:37

It's not clear when you say "I work in industry for a director" whether you are also an employee of the company from which the director wishes to retrospectively say he received salary, or merely an accountant/agent for the company and/or the director.

1. There is no question regarding a PAYE payment needs to be reported (on or before the date of the payment) via RTI ... and that late reporting will attract penalties.

2. If the director is hoping that PAYE doesn't have to be operated in the first place, then point him at https://www.gov.uk/paye-for-employers - in particular where it says "You do not need to register for PAYE if none of your employees are paid £123 or more a week, get expenses and benefits, have another job or get a pension. However, you must keep payroll records."

3. So, we're back to the facts - were the "monies taken and put into a loan account" a payment of salary or not?
In the absence of any payroll records to support that assertion it would be hard to see that as a 'Yes' (which would, as above, anyway result in the need to submit late RTI returns - after setting-up a retrospective PAYE scheme if that's necessary or even possible - and paying the penalties).
If the answer is 'No', then the payments must have been something else (loans to the director?) ... and should be treated as such in the usual way.

One of the main points of RTI was to prevent Directors from making exactly these kind of retrospective decisions that personal withdrawals from 'their' company were really salary (when, if it wasn't at the time then it can't be so labelled after the event)!

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Replying to Hugo Fair:
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By Hugo Fair
22nd May 2022 20:39

BTW "if this was an accrued salary/bonus" it wouldn't help in the way your director might envisage.
In most circumstances, such an accrual would be deemed by HMRC as needing to be reported via RTI at the time the liability arose ... meaning the records would need to support that along with the relevant RTI submissions - as well as presumably the reverse 'loan' by the director (until payment was actually made) in the books.

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By FCExtraordinaire
22nd May 2022 20:57

I am on assignment via an agency and accounting is not my only issue to resolve for this SME it seems... Thank you for your points and the responses so far to point me in the right direction.

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RLI
By lionofludesch
23rd May 2022 00:14

Is the director aware that he will have no pension entitlement if he doesn't report this salary?

That may be a disadvantage that he, like many before him, has overlooked.

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Replying to lionofludesch:
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By FCExtraordinaire
23rd May 2022 00:24

That's a good point and I'll add that to the many points to raise , thanks.

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By AndyC555
23rd May 2022 14:29

It's possible to run an 'annual' payroll - although only if there is only one payment of salary a year - usually in March.

Earlier payments could, I suppose, be treated as loans, repaid by the book-keeping salary payment in March. There could, though, be BIK issues if the amount of 'loan' outstanding at any point exceeds £10k

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