Company Secretary and tax question

skyjumper

hi guys, I'm sorry I'm not trying to hijack this thread, but had a question for Pennywise and Merlin Accounts, which is realted to OP's query.

If OP were to be the Comp. Sec. and say she had informed the Company House that she will be doing the Sec. job for this Company in April this year, and she hasn't been paid all this time, until October, can the Company pay her starting from Nov. onwards for the works she has been doing, and pay all her the personal allowance between Nov and April for this tax year?

In another words, is it possible to back date the pay slip and pay for the retrospective months? All this - we are assuming that the Company House already know that the OP has been working as a Sec all this time since April 08.

thanks for any suggestions

simpywimpy

I do the same thing for my son in his salon. I suppose therefore I could claim 6k wages tax free and put it to one side for him thereby using all tax allowances? He is part of a limited company.

Also, if you add yourself as company secretary, does this make you liable at all in any way?

Merlin_Accounts

Hi Skyjumper

Basically a company secretary is treated the same way as any other employee when it comes to paying them.

If, for example, you paid the co sec on 30 November 2/3rds of the annual ni exempt amount for 2008/09 (that is £5435 x 2/3rds), and assuming they have no other jobs or pensions using their personal tax allowances, then that payment can be paid without tax. However, it is the national insurance that you have to watch out for.

National insurance is computed on pay after establishing a person's pay period, so if someone is paid weekly their allowance is split into 52nds, monthly, split into 12ths, 3 monthly, split into quarters etc..

If you paid the Co Sec on 30 Nov for 8 months, then paid them monthly after that, I think you would find that you have to account for national insurance on essentially 7/8ths of that first payment. Might be better to opt to pay them annually (no argument then), or quarterly.

You cannot of course backdate payments as pay has to have been physically paid to them at that time. Had they been a director since April things would be slightly different.

Hope this helps

skyjumper

thanks MerlinAccounts for claryfying that.

What if the total pay is below the NI threshold and the Com Sec is only a Sec and not a share holder and doesn't have any other income during this time. will the same scnario work out?

Merlin_Accounts

Hi Skyjumper

Not being a shareholder (or indeed being one) has no bearing on the pay. If she were a shareholder you could pay dividends too - but that is going off the question a bit so I'll not digress further.

If the total pay when you first decide to pay the Co Sec is below the NI threshold for that pay period there would be no NI. So, if the first pay is in Nov and the gross was only 1/12th of £5435 when paid in Nov (and each month after that) there would be no NI. If you paid 8/12ths all at once in Nov, and then paid monthly afterwards, it could well be argued that their pay period is monthly, so the payment of 8/12ths of £5435 in Nov would leave the majority (7/8ths) in charge for NI. Tax wise, having no other pay means their personal tax allowance is available in full and so no tax wil be due.

Had they been a Director the NI is worked out on an annual eanings basis, in which case you could pay 8/12ths all at once and there would be no NI. This is assuming they are a Director from the beginning of the tax year (so you cant now appoint them as a Director to try circumvent the situation as the annual period only starts from the date of appointment). Likewise you cant back date the appointment as a Director to 6 April (Companies House would have needed to have been informed within 28 days of the appointment).

Maybe you need to put the Co Sec onto an annual salary only this time around, payable, in full, on 31 March (2009 in this case), then change her pay period for the next tax year to monthly pay.

greyteam1959

Just to add my little bit.......
Make sure you pay a small amount of NI so that your pension rights are not affected.
But surely you should be sorting all this out with your accountant ????

sillysausage237

I reckon I will work about 5-10 hours per week as I have to check the company PO box for mail every day which is a 20 mile walk with LO and I don't drive.

If I am paid a standard rate of say £10 per hour that is 10 x 10 = 100 per week or £400 per month.

But how is this actually shown on a pay slip. Can he pay me the amount without tax deductoins (I know he still has to pay my NI) or does he tax it at the 20% rate and then I claim it back at the end of the tax year?

I have sent off the paperwork to Companies House to register as the Company Sec, I do not have any other income, I am a housewife who will be sending out the invoices for my husbands company and doing all the secretarial work as I assume a Company Secretary would do.

Merlin_Accounts

Hi

First of all, you will be pleased to note that on £100 per week there will be no national insurance to account for. You do however need to operate a PAYE scheme - would recommend you get your hands on HM Revenue & Customs Employer CD Rom if you are unsure how to do this. The CD Rom is free and has a basic payroll programme on it that should help you immensely.

Your wage will of course have to be physically paid to you out of the company each week (or you could do it monthly). Using £100 per week the monthly equivalent is £433.33 (this is £100 pw x 52 weeks divide by 12 months = monthly pay of £433.33).

You will probably note form earlier posts that as Company Secretary the number of hours you work are not particularly important - the position is classed as being that of an office holder of the company so, with the added responsibilities of the role, comes a higher rate of pay. £100 pw is perfectly reasonable.

Now, tax. If you have no other taxable income then you should complete a form P46 (after you have got the company registered as an employer with the tax office that is), and tick statement A. This will allow all of your current year tax allowance to be made available for earnings from the company - so no tax to pay!

Payslips - why not pop down to Staples or similar and buy a pad of them - most stationers have got them and they're cheap enough. Always retain copies of any payslips you issue (good pratice, not compulsory).

Finally I would urge you to talk to your accountant just to keep him in the picture with what you are doing.

debsthe1

Hi Silly Sausage

Just to let you know that I am also Comp Sec and earning the £6k p.a etc.
We have checked with our accountants and they have said there shouldn't be a problem! But our accountants are doing the PAYE for us although I pay in the tax to HMRC.

Best of luck!!

sillysausage237

debsthe1 wrote: »

Hi Silly Sausage

Just to let you know that I am also Comp Sec and earning the £6k p.a etc.
We have checked with our accountants and they have said there shouldn't be a problem! But our accountants are doing the PAYE for us although I pay in the tax to HMRC.

Best of luck!!

Thanks for that. I think our accountants are actually going to be doing the PAYE for us as well although like you I have to do all the physical moving of monies and payments etc.

I doubt that we are really saving much (in taxes) as the amount of tax on £6,000 is probably miniscule anyway.