SMP for directors - timing of pay

Could you push all the pay into the relevant period to increase SMP entitlement

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This is an extension of this questions - https://www.accountingweb.co.uk/any-answers/can-a-company-director-raise...

 

If a director is on a standard "basic" salary to use up the PA, i.e. £12,570 per annum, would it be possible to adjust the timing of the salary payments so that the full amount sat in the relevant period alone?

 

Essentially, would they still be treated as in continuous employment for the 26 weeks prior by virtue of their directorship even if they did not receive any payments except for in the 8 week relevant period?

 

If so, it feels like a simple planning exercise if you are told well enough in advance. I appreciate some women might not want to tell their close family and friends that soon, let alone their accountant, but it could mean they are entitled to thousands extra in SMP.

 

Be interested in everyone's thoughts and experience on this.

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By Hugo Fair
10th Aug 2023 15:10

".. but it could mean they are entitled to thousands extra in SMP" ... how?

The variable-rate portion of SMP (90% of AWE) only applies to the first 6 weeks - so you'd have to be cramming a *lot* of extra pay into the relevant 8 week period (if you can determine in advance when those qualifying weeks will take place).

I suspect there's a lot of other factors* that could come into play, but frankly can't be bothered to work out all the potential scenarios ... especially when (a) it reeks of bending the rules (for those who have already opted to take a PA salary in order to save tax), and (b) it won't produce much benefit for all the (risky) effort.

* = FWIW you ask "would they still be treated as in continuous employment for the 26 weeks prior by virtue of their directorship even if they did not receive any payments except for in the 8 week relevant period?"
Employment has no direct correlation with being a Director - so, strictly speaking, No. What would matter is what their employment contract says (on several aspects including frequency and timing of payment) - much of which would therefore need to be amended/re-issued (so adding more faff and costs to the process).
But you've probably stumbled on the hole below the waterline ... in that it is at least debatable whether an employee remains an employee on zero pay - and opens up a host of other potential problems (not just eligibility to SMP itself, but also NMW if any work was done during the unpaid periods).

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Replying to Hugo Fair:
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By Davemaverick
10th Aug 2023 21:43

Hi Hugo. Thanks for your thoughts and warnings.

I did the calculations and it would be a difference of around £7k in SMP, so no small amount.

Re the director not being an employee, this has always been my understanding, although I had the argument recently with HMRC when they did not want to set-up a PAYE scheme to only report P11D benefits for a director as I (in my eyes) correctly stated there were no employees. Of course, I won't use that interaction as solid support for anything I do re SMP, but it does suggest HMRC does not have a clear/consistent position.

I'll have a think, do some more research on the employment law aspects, and tread carefully.

Thanks again.

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