Ltd Co & Back Paying Wages

Firefly1710

We started a Ltd Company 1st Nov. My husband as director and myself as company sec. To date neither of us have drawn a wage but now we intend to do that at £144 per week. Assuming no pre-company employment is it feasable to backdate these payments to the date of company formation? We both registered PAYE. Thank you!

nomunnofun

No problem at all with this. However, if the payment is all made in one go the NIC will be incorrect as only the maximun for one week will be deducted. Accordingly directors must use what is known as the 'Table method' for calculating.

In other words work out the tax and NIC for one week and multiply everything by the number of weeks required.

Mudd14

You could process one lump sum in month 12 (march) to ensure your NI is credited for state benefits but you don't pay anything.

If you need any help setting up or running your payroll let me know. I will drop you a pm.

heather_helo

make sure you have got a company PAYE reference - directors can be processed ether way, be aware that bonuses can be accrued for up to 9 months later. also note that you may be better reducing directors loan accounts rather than taking a salary - depending on personal circumstances.

Mistral001

Please do not take this the wrong way. You might be doing something that is entirely suitable for you, but on the face of it you seem to be going down a very bureaucratic route. Have I got this right? You have registered the firm as a PAYE employer and also registered the directors as employees?

The problem is that once you register it is not easy to change. PAYE will assume that once an employer that you will always be one. I am just a sole trader and registered as an employer with PAYE about 5 years ago. The employee left after 6 months and I have not found the need to employ anybody since. After he left I got requests from PAYE for payments every year for three years despite telling them several times that I was no-longer an employer. I still get letters from them.

Mudd14

Writing to them ceasing the scheme should be enough. I have closed down a few hundred PAYE schemes with no problems!

nomunnofun

Mudd14 wrote: »

You could process one lump sum in month 12 (march) to ensure your NI is credited for state benefits but you don't pay anything.

If you need any help setting up or running your payroll let me know. I will drop you a pm.

You cannot do this if you are a director as I have stated in my earlier post. This is basic payroll rules for directors.

http://www.hmrc.gov.uk/nitables/ca44.pdf

Mudd14

Where exactly does it say you cannot do this?! I have done it as a bureau manager in my previous job for an accountant for years. Annual earnings period rules are applied for directors.

nomunnofun

Mudd14 wrote: »

Where exactly does it say you cannot do this?! I have done it as a bureau manager in my previous job for an accountant for years. Annual earnings period rules are applied for directors.

Clearly you have a better understanding than I gave you credit for, and for that I apologise. There are many who believe that, by paying a director's salary in one month, normally March, huge savings in NIC can be made. For example, an annual salary of £20000 paid in one month attracts only the maximum NIC for that month and the rules for directors prevent that, clearly something of which you are aware. Your advice to 'pay a lump sum ....but you don't pay anything' is fine given the limits which must be defined in the context of the example that I have quoted. This is a favourite area of investigation for HMRC as I have found over many years.