Following on from Kazmc can HMRC not have some FAQ's about this on their website.
And it would be handy to perhaps have a similar summary on this website so as things change it is updated with a note what has been updated and when. Someone looking for the answer to Kazmc question might not look in here and to be honest with the amount of queries on this thread alone might get lost.
"Most of my Directors are paid up to the Secondary Threshold, not the LEL. Ergo, they require a PAYE scheme, but there is not and will never be any liability to Tax or NIC.
"However, if all payments are made in the first instance by credit to the Directors Loan Account and not in cash, then if this post is correct, there will never be any reportable payments to generate a FPS.
"So how would the scheme be operated in practice?"
So far I have read nothing here which answers my question.
For the clients I have like that (which is most directors too) I will run/report monthly or run/report a quartely payroll. If you want those credits to count as salary then there surely has to be a report on/before the credit date.
So run a qurterly payroll in say April, client can then take that money up to June so a report has been made on/before. Next quarter run July and so on. As long as a report is made and HMRC can not argue the later withdrawals are additional salary I can not see a problem with this. Just drawing the salary later on.
Now if a monthly reporting system was in place so you just report each months payroll by 19th (or15th whatever) then this would be all so much easier. Do DWP really need payments as they happen, would reporting them monthly make a massive difference. It could then be one report of the final payroll each month, any errors would be corrected, HMRC would know what PAYE an employer owes and the DWP would know how much someone was paid..... simples
I was thinking about this yesterday evening and by coincidence came up with very similar thoughts to the above post by Clint Westwood. To be 100% sure no problems then some client's need some guidance but at the end of the day is this really going to be a problem and it is being blowing out of proportion.
I have had HMRC reviews into loan accounts overdrawn by thousands of pounds where one dividend voted and a bonus/salary to clear it at certain times (usually the accounts year end). HMRC never tried to argue the withdrawals taken were payments on account of wages and the paperwork was, to be honest, not great.
tkingston touches on an important point. For some directors paid below LEL no reporting requirement exists, but you may want a scheme to report P11D. We are hoping to confirm that an "annual scheme" will suffice here - no nil payment reports and just a P11D / year end submission. Can't nail that one 100% yet, but looking possible. Remember if you pay anyone at all at or above LEL you must report directors paid less than LEL. Same goes if you have someone on BR - all payments must then be reported.... At present worst case scenario is that yopu'll have a scheme and have to do inactivity reports. There's plenty on the site about those elsewhere.
Rebecca
Can you clarify something with this, or ask HMRC to clarify this:
If PAYE scheme exists for say P11Ds, or for the odd times an employee does go over the LEL, do you have to report all the earnings when they are paid?
I originally understood that if all employees are under LEL no reporting requirements; so if no scheme no action, but if a PAYE scheme exisits then a nil EPS is submitted each month, or inactivity report (or whatever it is called).
However there is conflicting advice that if a PAYE scheme exsists you have to report ALL employees even if all below LEL.
Example:
month 1 - 2 employees paid £300 each
Month 2 - 1 is paid £500 and 1 paid £300
So Month 1 - can you file a nil EPS OR do you have to report on a FPS ?
Month 2 - FPS required to report both employees as one employee over LEL.
Won't you still need a PAYE scheme if, although the director's pay is below the LEL and he has no tax to pay, he has to complete a P11D, because that requires a PAYE scheme reference?
On a recent HMRC RTI presentation I attended we were told that they would have to file a nil FPS each month, or at least file a nil FPS in April 2013 and indicate there will be no further reports under RTI for 6 months (which I think is the maximum time you can advise HMRC that there are no reports). Then every 6 months file a nil FPS indicating nothing for a further 6 months and so on.
Our issue with that is we pay the payroll software providers per licence of company, so we suddenly need some "nil" companies just to file a nil FPS every 6 months. We are hoping to use the HMRC basic tools to do this as I think that allows multiple employer set up.
I have amended a few P35's online even where I have not used the HMRC online service to file the original P35.
You can log into the HMRC service, use the "filing only" option to create a client (if you have used say Sage) and then set up the employees you need to amend, then select amend P14 option.
P35 amendments can be made online using the HMRC service. I have found this much quicker to use and I am never convinced that written amendments are dealt with very quickly. You just show the amendments as a difference on the P14's you need to amend, so if a figure is reduced you show it as a minus figure in the appropriate box on the P14/P35.
They came into force 6/4/2010 so apply from 19/5/10 payments. Although I have no idea how HMRC will police this as they do not know what employers should be paying each month.
My answers
a summary
Following on from Kazmc can HMRC not have some FAQ's about this on their website.
And it would be handy to perhaps have a similar summary on this website so as things change it is updated with a note what has been updated and when. Someone looking for the answer to Kazmc question might not look in here and to be honest with the amount of queries on this thread alone might get lost.
Report due
For the clients I have like that (which is most directors too) I will run/report monthly or run/report a quartely payroll. If you want those credits to count as salary then there surely has to be a report on/before the credit date.
So run a qurterly payroll in say April, client can then take that money up to June so a report has been made on/before. Next quarter run July and so on. As long as a report is made and HMRC can not argue the later withdrawals are additional salary I can not see a problem with this. Just drawing the salary later on.
Now if a monthly reporting system was in place so you just report each months payroll by 19th (or15th whatever) then this would be all so much easier. Do DWP really need payments as they happen, would reporting them monthly make a massive difference. It could then be one report of the final payroll each month, any errors would be corrected, HMRC would know what PAYE an employer owes and the DWP would know how much someone was paid..... simples
Thoughts
I was thinking about this yesterday evening and by coincidence came up with very similar thoughts to the above post by Clint Westwood. To be 100% sure no problems then some client's need some guidance but at the end of the day is this really going to be a problem and it is being blowing out of proportion.
I have had HMRC reviews into loan accounts overdrawn by thousands of pounds where one dividend voted and a bonus/salary to clear it at certain times (usually the accounts year end). HMRC never tried to argue the withdrawals taken were payments on account of wages and the paperwork was, to be honest, not great.
Nil reports and LEL
Rebecca
Can you clarify something with this, or ask HMRC to clarify this:
If PAYE scheme exists for say P11Ds, or for the odd times an employee does go over the LEL, do you have to report all the earnings when they are paid?
I originally understood that if all employees are under LEL no reporting requirements; so if no scheme no action, but if a PAYE scheme exisits then a nil EPS is submitted each month, or inactivity report (or whatever it is called).
However there is conflicting advice that if a PAYE scheme exsists you have to report ALL employees even if all below LEL.
Example:
month 1 - 2 employees paid £300 each
Month 2 - 1 is paid £500 and 1 paid £300
So Month 1 - can you file a nil EPS OR do you have to report on a FPS ?
Month 2 - FPS required to report both employees as one employee over LEL.
It is month 1 which is not clear in my mind.
Thanks.
P11D only schemes
On a recent HMRC RTI presentation I attended we were told that they would have to file a nil FPS each month, or at least file a nil FPS in April 2013 and indicate there will be no further reports under RTI for 6 months (which I think is the maximum time you can advise HMRC that there are no reports). Then every 6 months file a nil FPS indicating nothing for a further 6 months and so on.
Our issue with that is we pay the payroll software providers per licence of company, so we suddenly need some "nil" companies just to file a nil FPS every 6 months. We are hoping to use the HMRC basic tools to do this as I think that allows multiple employer set up.
overlooked
One thing where the 52% definitely kicks in is if benefits are involved.
Consider:
Salary £40,000 plus car/other BIK of say £4,000 = £1,525 at 40%
But for NI at £40k still paying 12% NI.
Amending online
I have amended a few P35's online even where I have not used the HMRC online service to file the original P35.
You can log into the HMRC service, use the "filing only" option to create a client (if you have used say Sage) and then set up the employees you need to amend, then select amend P14 option.
Very easy and acceptable by HMRC.
P35 amendments can be made online using the HMRC service. I have found this much quicker to use and I am never convinced that written amendments are dealt with very quickly. You just show the amendments as a difference on the P14's you need to amend, so if a figure is reduced you show it as a minus figure in the appropriate box on the P14/P35.
With regards to the penalty question above are you referring to these http://www.hmrc.gov.uk/paye/problems-inspections/late-payments.htm
They came into force 6/4/2010 so apply from 19/5/10 payments. Although I have no idea how HMRC will police this as they do not know what employers should be paying each month.